EWJ breaks below 200-day moving average for the first time since July 13th
iShares MSCI Japan ETF (EWJ) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, EWJ ended the month -1.07% lower at 54.33 after tanking $1.44 (-2.58%) today on high volume. This is the biggest single-day loss in over a month. Today's close at 54.33 marks the lowest recorded closing price since May 22nd.
Daily Candlestick Chart (EWJ as at Jul 31, 2020):
Friday's trading range has been $0.67 (1.22%), that's far above the last trading month's daily average range of $0.44. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for EWJ.
One bearish candlestick pattern matches today's price action, the Black Candle.
Prices are trading close to the key technical support level at 54.07 (S1). The ETF closed below the 200-day moving average at 55.66 for the first time since July 13th.
Crossing below the lower Bollinger Band for the first time since March 16th, prices have shown unusually strong downward momentum in the short-term. This might either indicate a potential selling climax after which prices could head back up towards the mean of the Bollinger Bands at 55.91 or signal the beginning of a strong momentum breakout leading to even lower prices. The last time prices broke out below the lower Bollinger Band on March 12th, EWJ actually gained 3.28% on the following trading day.
While the market is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Further selling could move prices lower should the market test June's close-by low at 54.07.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Strong Down Move" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for EWJ. Out of 208 times, EWJ closed higher 60.58% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after 10 trading days, showing a win rate of 61.06% with an average market move of 0.63%.