LABU dominated by bears dragging the market lower throughout the day
Direxion Daily S&P Biotech Bull 3X ETF (LABU) Technical Analysis Report for May 26, 2020 | by Techniquant Editorial Team
LABU finished Tuesday at 48.47 losing $3.73 (-7.15%). The bears were in full control today, moving the market lower throughout the whole session. Closing below Friday's low at 49.13, the market confirmed its breakout through the prior session low after trading up to $0.93 below it intraday.
Daily Candlestick Chart (LABU as at May 26, 2020):
Tuesday's trading range has been $6.91 (12.56%), that's far above the last trading month's daily average range of $4.60. Things look different on the weekly timeframe, where the market's trading range of the last week has been below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for LABU.
In a volatile session, prices traded above the previous day's high as well as below the prior day's low, forming a bearish Outside Bar. In spite of a strong opening the ETF closed below the previous day's open and close, forming a bearish Engulfing Candle. Additionally, one bearish candlestick pattern matches today's price action, the Black Candle. The last time a Black Candle showed up on May 19th, LABU actually gained 8.44% on the following trading day.
Prices are trading close to the key technical support level at 48.01 (S1).
LABU shows weakness in the short-term (in accordance with its long-term downtrend) with only the medium-term trend still being bullish.
Selling might accelerate should prices move below the close-by swing low at 48.01 where further sell stops could get activated.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Decisive Down Move" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for LABU. Out of 180 times, LABU closed higher 53.89% 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 60.56% with an average market move of 5.15%.