XLF still stuck within tight trading range
Financial Select Sector SPDR Fund (XLF) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
XLF finished Wednesday at 24.99 gaining $0.28 (1.13%). Closing within the prior day's range, prices missed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (XLF as at Sep 16, 2020):
Wednesday's trading range has been $0.56 (2.26%), that's slightly above the last trading month's daily average range of $0.46. 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 XLF. Prices continued to consolidate within a tight trading range between 24.49 and 25.27 where it has been caught now for the whole last trading week.
The ETF managed to close back above the 20-day moving average at 24.91. Unable to break through the key technical resistance level at 25.17 (R1), the market closed below it after spiking up to 25.27 earlier during the day. The failure to close above the resistance might increase that levels importance going forward. After having been unable to move lower than 24.69 in the prior session, XLF found buyers again around the same price level today at 24.71. The last time this happened on September 11th, XLF gained 1.38% on the following trading day.
Although the ETF is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Buying might accelerate should prices move above the close-by swing high at 25.27 where further buy stops could get activated. Selling might speed up should prices move below the nearby swing low at 24.69 where further sell stops could get triggered.
Among the five market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Close to Swing Low" stand out. While it is usually interpreted as neutral, it has actually shown to be bullish for XLF. Out of 629 times, XLF closed higher 52.62% 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 59.78% with an average market move of 0.59%.