XLP stuck within tight trading range
Consumer Staples Select Sector SPDR Fund (XLP) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
XLP ended the week 0.14% higher at 57.47 after gaining $0.20 (0.35%) today on low volume ahead of tomorrow's Memorial Day market holiday. Trading up to $0.13 lower after the open, the market managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the prior day's range, prices failed to decisively move beyond the previous day's trading range in a lackluster session.
Daily Candlestick Chart (XLP as at May 22, 2020):
Friday's trading range has been $0.36 (0.63%), that's far below the last trading month's daily average range of $0.82. Weekly volatility is also lower, being slightly below the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for XLP. Prices continued to consolidate within a tight trading range between 57.15 and 57.94 where it has been caught now for the last three trading days.
During the whole day, prices traded within the prior day's range, unable to trade above the previous day's high or below the prior day's low forming an Inside Bar. After moving lower in the previous session, the ETF managed to close higher but below the prior day's open, forming a bullish Harami Candle.
After having been unable to move lower than 57.15 in the previous session, XLP found buyers again around the same price level today at 57.16. The last time this happened on Wednesday, XLP actually lost -1.11% on the following trading day.
The market shows weakness in the short-term (in accordance with its long-term downtrend) with only the medium-term trend still being bullish.
Buying could accelerate should prices move above the close-by swing high at 58.60 where further buy stops might get triggered. Selling could speed up should prices move below the nearby swing low at 57.15 where further sell stops might get activated.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Low close to prior low" stand out. Its common bullish interpretation has been confirmed for XLP. Out of 477 times, XLP closed higher 57.23% 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 62.26% with an average market move of 0.42%.