WEAT daily Aug 4th
On Friday, the WEAT Long Trade Setup broke above & closed right on/above the primary downtrend line, triggering an entry on the setup. Earlier in the week I was going to point out what appeared to be a breakout above the downtrend line on Monday morning as I had noticed the odd looking spike immediately following the open. However, when I pulled the 1-minute streaming chart, I could see what appeared to be only an errant fill (a single trade well away from the current bid/ask price) at the open, well above both the previous closing price and the level that prices traded at immediately following the open.
Occasionally you will see very long candlestick shadows (tails or wicks) that do not mesh with the trading activity of the security that day and most charting programs will often adjust the candlesticks to back out those errant fills or the erroneously reported trade. However, that “false” candlestick wick still appears on the chart nonetheless at this point but had you tried to trade WEAT immediately following that errant fill or charting glitch, you would have seen that prices were immediately much lower and continued to trade well below the trendline since then until the break out on Friday.
Regardless, WEAT is currently trading at the same level as where it was last Monday morning and today is the second day that prices have traded above the downtrend line (and on above average volume, which helps to validate the breakout). As with the other related soft commodity Active Trade, CORN, WEAT also has some resistance somewhat overhead, around the 14.00 area, in which a solid break above would bode well for the longer-term prospects of this trade.
As WEAT is still relatively close to the uptrend line and as such, still offers an objective entry, it will remain as a Trade Setup as well as an Active Trade for now. As a backtest of the trendline is certainly a possibility at this time, make sure to set your stops and keep your position sizing commensurate with your trading plan, including your preferred target and whether you want to take a full or only a partial position now, allowing room to add to the position should WEAT clearly take out the 14.00 – 14.50 resistance zone OR go on to make a backtest of the trendline at lower levels.