XLV finds buyers at key support level
Health Care Select Sector SPDR ETF (XLV) Technical Analysis Report for Oct 12, 2018 | by Techniquant Editorial Team
XLV ended the week -3.41% lower at 91.07 after surging $1.38 (1.54%) today on high volume. This is the biggest single-day gain in over six months. Trading up to $0.75 lower after the open, the ETF 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 missed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (XLV as at Oct 12, 2018):
Friday's trading range has been $1.39 (1.53%), that's above the last trading month's daily average range of $1.00. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently strongly higher than usual for XLV.
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. Additionally, two candlestick patterns are matching today's price action, the Bullish Spinning Top and the Hammer which are both known as bullish patterns. The last time a Hammer showed up on May 3rd, XLV gained 0.80% on the following trading day.
After trading down to 90.02 earlier during the day, the market bounced off the key technical support level at 90.28 (S1). The failure to close below the support might increase that levels importance as support going forward.
With another close below the lower Bollinger Band, prices are confirming their strong downward momentum in the short-term. A rally back into the Bollinger Band on the next trading day though could signal a potential change in momentum that might lead to a correction back up towards the center of the Bollinger Bands at 93.95.
Although XLV is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Hammer" stand out. Its common bullish interpretation has been confirmed for XLV. Out of 16 times, XLV closed higher 62.50% 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 68.75% with an average market move of 1.98%.