LABU still stuck within tight trading range
Direxion Daily S&P Biotech Bull 3X ETF (LABU) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
LABU finished the week 9.32% higher at 52.20 after gaining $1.78 (3.53%) today on low volume ahead of tomorrow's Memorial Day market holiday. Today's close at 52.20 marks the highest recorded closing price since March 4th. The bulls were in full control today, moving the market higher throughout the whole session. Closing above Thursday's high at 51.75, the ETF confirmed its breakout through the previous session high after trading up to $0.63 above it intraday.
Daily Candlestick Chart (LABU as at May 22, 2020):
Friday's trading range has been $3.25 (6.51%), that's below the last trading month's daily average range of $4.39. Weekly volatility is also lower, being way below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for LABU. Prices continued to consolidate within a tight trading range between 47.28 and 54.20 where it has been caught now for the whole last trading week.
Two candlestick patterns are matching today's price action, the White Candle which is known as bullish pattern and one bearish pattern, the Last Engulfing Top Pattern.
Prices are trading close to the key technical resistance level at 54.43 (R1). The market ran into sellers again today around 52.38 for the third trading day in a row after having found sellers at 51.75 in the prior session and at 51.59 two days ago. The last time this happened on March 19th, LABU lost -4.22% on the following trading day.
Though still in a long-term downtrend, the short and medium-term trends both turned bullish already.
Buying could accelerate should prices move above the close-by swing high at 54.20 where further buy stops might get triggered. Selling could speed up should prices move below the nearby swing low at 48.01 where further sell stops might get activated. As prices are trading close to May's high at 54.43, upside momentum could accelerate should LABU mark new highs for the month.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Last Engulfing Top Pattern" stand out. Its common bearish interpretation has been confirmed for LABU. Out of 38 times, LABU closed lower 57.89% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 55.26% with an average market move of -3.46%.