KOSPI enters Golden Cross for the first time since March 20th
Korea Composite Stock Price Index (KOSPI) Technical Analysis Report for Jul 07, 2020 | by Techniquant Editorial Team
KOSPI finished Tuesday at 2164.17 losing ₩23.76 (-1.09%). The bears were in full control today, moving the market lower throughout the whole session. Closing within the previous day's range, prices missed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (KOSPI as at Jul 07, 2020):
Tuesday's trading range has been ₩42.76 (1.94%), that's slightly above the last trading month's daily average range of ₩38.24. Weekly volatility is also higher, being slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for KOSPI.
Two candlestick patterns are matching today's price action, the Black Candle and the Dark Cloud Cover which are both known as bearish patterns. The last time a Black Candle showed up on July 1st, KOSPI actually gained 1.36% on the following trading day.
Though still in a long-term downtrend, the short and medium-term trends both turned bullish already. With its 50-day moving average crossing above its 200-day moving average, Korea Composite Index has entered a so-called "Golden Cross" for the first time since March 20th. Showing increasing upward momentum in the short and medium-term the "Golden Cross" is known to indicate a potential bull market on the horizon.
Further buying could move prices higher should the market test June's nearby high at 2217.21.
Among the six market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Golden Cross" stand out. Although it is usually interpreted as bullish, it has actually shown to be bearish for Korea Composite Index. Out of 11 times, KOSPI closed lower 63.64% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 63.64% with an average market move of -0.18%.