BVSP closes within prior day's range after lackluster session
Bovespa Index (BVSP) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
BVSP finished the week 5.95% higher at 82173.21 after losing R$853.79 (-1.03%) today. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (BVSP as at May 22, 2020):
Friday's trading range has been R$1358.29 (1.64%), that's below the last trading month's daily average range of R$2619.11. 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 BVSP. Prices continued to consolidate within a tight trading range between 80740.00 and 83309.00 where it has been caught now for the last three trading days.
During the whole day, prices traded within the previous day's range, unable to trade above the prior day's high or below the previous day's low forming an Inside Bar. Additionally, two candlestick patterns are matching today's price action, the Bearish Short Candle and the Black Candle which are both known as bearish patterns. The last time a Black Candle showed up on May 15th, BVSP actually gained 4.69% on the following trading day.
After having been unable to move above 83309.00 in the prior session, the market ran into sellers again around the same price level today, failing to move higher than 83027.09.
Though the stock index is experiencing a short-term uptrend, this could just be a correction, as both the medium and long-term trends are still bearish.
Buying might accelerate should prices move above the nearby swing high at 83309.00 where further buy stops could get triggered. Further buying might move prices higher should the market test April's close-by high at 83598.00.
Among the four market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Short Candle" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Bovespa. Out of 83 times, BVSP closed higher 56.63% 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 50.60% with an average market move of 0.43%.