SPY finds buyers at key support level
SPDR S&P 500 ETF (SPY) Technical Analysis Report for Jul 13, 2020 | by Techniquant Editorial Team
SPY ended Monday at 314.81 losing $2.78 (-0.88%). Closing within the prior day's range, prices failed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (SPY as at Jul 13, 2020):
Monday's trading range has been $8.58 (2.68%), that's far above the last trading month's daily average range of $5.58. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for SPY.
Two candlestick patterns are matching today's price action, the Black Candle and the Dark Cloud Cover which are both known as bearish patterns. The last time a Dark Cloud Cover showed up on April 28th, SPY actually gained 2.62% on the following trading day.
After trading down to 314.13 earlier during the day, the ETF bounced off the key technical support level at 314.38 (S1). The failure to close below the support might increase that levels importance as support going forward.
Although still in a long-term downtrend, the short and medium-term trends both turned bullish already.
Selling could speed up should prices move below the nearby swing low at 310.68 where further sell stops might get triggered. Further buying could move prices higher should the market test June's close-by high at 323.41. As prices are trading close to July's low at 309.07, downside momentum might accelerate should the market mark new lows for the month.
Among the six market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Dark Cloud Cover" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for SPY. Out of 13 times, SPY closed higher 76.92% 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 69.23% with an average market move of 0.70%.