The DB Agriculture ETF (DBA) was featured in ChartWatchers on October 1st as it formed a large cup-with-handle pattern, which is a bullish continuation pattern. The ETF battled its resistance zone the rest of the month and broke out to new highs in November. Flash forward to January and we have a short-term bullish consolidation and breakout working.
The chart below shows DBA with the cup-with-handle breakout and broken resistance turning into support after the breakout (red/green shading). Notice how DBA fell sharply in early December and the broken resistance zone held as buyers stepped back in (support). "Broken resistance turns support" is a classic tenet of technical analysis that traders can use to catch post-breakout throwbacks (return to resistance).
The DB Agriculture ETF extended its consolidation into January with prices holding above the resistance breakout. This is also a sign of strength because the breakout is holding. A triangle of sorts formed (blue lines) and DBA broke out with a bounce the last four trading days. This consolidation digested the gains from mid-September to late November and represents a bullish continuation pattern, or rest within the uptrend. The breakout signals a continuation higher and new highs are expected.
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