SPY closes below its opening price unable to hold early session gains
SPDR S&P 500 ETF (SPY) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
SPY finished Wednesday at 338.88 losing $1.29 (-0.38%). Trading $1.55 higher after the open, the ETF was unable to hold its gains as the bears took control ending the day below its opening price. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (SPY as at Sep 16, 2020):
Wednesday's trading range has been $4.53 (1.33%), that's slightly below the last trading month's daily average range of $5.36. Weekly volatility is also lower, being slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for SPY.
Even with a strong opening the market 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.
After spiking up to 343.06 during the day, SPY found resistance at the 20-day moving average at 342.73. The last time this happened on April 3rd, SPY actually gained 6.72% on the following trading day. After having been unable to move lower than 338.47 in the prior session, the ETF found buyers again around the same price level today at 338.53.
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.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Engulfing Candle" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for SPY. Out of 89 times, SPY closed higher 61.80% 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 68.54% with an average market move of 0.58%.