Short May Wheat

Corn, Soybeans, and Wheat all look weak today, but Wheat looks like the best short to me. Shorted the YW mini contract 2 minutes before the 14:20 ET close from 639 5/8. The chart above is the May Wheat Daily chart.

While this trade has some challenges, because we don't have enough confirmation, I decided to risk entering a little early based on the very Bearish setup and limit our financial risk. 

By lack of confirmation I mean we bounced off the 50% Fib on the previous up leg, as well as the 50sma, on the Daily chart, without making a lower low. We also haven't seen continuation downward by a second candle. And we may be in a sideways consolidation or wedge rather than a cascading down trend. The Bollinger Bands are still inside the Keltner Channel and Stochastics are mid-range. Because of all these challenges I decided to use the YW mini contract ($10/pt) rather than the ZW full contract ($50/pt).

By limiting our financial risk by getting in early I mean our risk is the distance from the entry to the Stop, so a higher entry is closer to the Stop than a lower entry. If we wait for confirmation we'll have a lower entry.

Here are the Bearish indications I see:

• Dark Cloud candlestick pattern
• 2/8/21 .5*Body=(647.75+659.5)/2=653.625
• 2/9/21 Close=654; very close to half the body, as calculated above
• 2/8 Hi=661, 2/9 Open=661; satisfies requirement of 2nd candle >= 1st candle high 
• Close below 8ema
• Possible Head & Shoulders
• Possible AB/CD
• Cascading lower highs after 52 wk high

Target = 604, just before the calculated D=603 1/4 (notice the 78.6% Fib is 595 3/4)

Stop = 663, just over most recent swing high 662 3/4

Risk = 663 - 639 5/8 = 23.375 * $10/pt = $233.75

Reward = 639 5/8 - 604 = 35.625 * $10/pt = $356.25

R:R = $356.25/$233.75 = 1:1.5 not great but acceptable