The most common and most likely answer to this crossword clue is the 8 letter word SIGHTING
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Buddy explains!

The straight part
We know that "an observation" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case an observation = sighting.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does SIGHTING mean?
SIGHTING verb- To register visually.
- To get sight of (something).
- To apply sights to; to adjust the sights of; also, to give the proper elevation and direction to by means of a sight.
- To take aim at.
- The act of catching sight of something, especially something searched for.