BVSP closes below its opening price unable to hold early session gains
Bovespa Index (BVSP) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
BVSP finished Wednesday at 99675.68 losing R$622.32 (-0.62%). Trading R$364.50 higher after the open, Bovespa was unable to hold its gains as the bears took control ending the day below its opening price. The last time this happened on September 11th, BVSP actually gained 1.94% on the following trading day. Closing within the prior day's range, prices missed to decisively move beyond the previous day's trading range in a lackluster session.
Daily Candlestick Chart (BVSP as at Sep 16, 2020):
Wednesday's trading range has been R$1000.34 (1.0%), that's far below the last trading month's daily average range of R$2000.12. 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.
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. In spite of a strong opening the stock index closed below the previous day's open and close, forming a bearish Engulfing Candle. 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.
Prices broke below the key technical support level at 100160.00 (now R1), which is likely to act as resistance going forward. After having been unable to move lower than 99647.00 in the prior session, the market found buyers again around the same price level today at 99663.02.
Although the index is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Buying could speed up should prices move above the close-by swing high at 100949.00 where further buy stops might get activated. Selling could accelerate should prices move below the nearby swing low at 97758.00 where further sell stops might get triggered.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Short Candle" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for Bovespa. Out of 82 times, BVSP closed higher 58.54% 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 53.66% with an average market move of 0.79%.