NKY tumbles, losing ¥629.23 (-2.82%) within a single day
Nikkei 225 Index (NKY) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 6th day in a row, NKY ended the month -2.59% lower at 21710.00 after tanking ¥629.23 (-2.82%) today. This is the biggest single-day loss in over a month. Today's close at 21710.00 marks the lowest recorded closing price since June 15th. The bears were in full control today, moving the market lower throughout the whole session. Ending with a weak close near the low of the day sets a bearish note for the next session.
Daily Candlestick Chart (NKY as at Jul 31, 2020):
Friday's trading range has been ¥585.05 (2.63%), that's far above the last trading month's daily average range of ¥230.13. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for NKY.
Two candlestick patterns are matching today's price action, the Bearish Closing Marubozu and the Black Candle which are both known as bearish patterns.
Nikkei 225 closed below the 200-day moving average at 21954.07 for the first time since June 15th.
Crossing below the lower Bollinger Band for the first time since March 16th, prices have shown unusually strong downward momentum in the short-term. This could either indicate a potential selling climax after which prices might head back up towards the mean of the Bollinger Bands at 22549.86 or signal the beginning of a strong momentum breakout leading to even lower prices. The last time prices broke out below the lower Bollinger Band on March 12th, NKY lost -6.08% on the following trading day.
While the index is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
Further selling might move prices lower should the market test June's nearby low at 21529.83.
Among the 14 market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Closing Marubozu" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for Nikkei 225. Out of 51 times, NKY closed higher 64.71% 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 eight trading days, showing a win rate of 58.82% with an average market move of 0.16%.
With three of the other Major World Indices closing higher and three closing lower today, the winners of the day are NDX surging 1.78% and SPX gaining 0.77%. On the flipside the worst performers have been FTSE closing -1.54% lower and DAX losing -0.54%. Read more