FAF finds buyers at key support level
First American Corporation (FAF) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving higher for the 3rd day in a row, FAF ended the week 11.04% higher at 49.47 after edging higher $0.40 (0.82%) today on low volume, outperforming the S&P 500 (0.24%) ahead of tomorrow's Memorial Day market holiday. Today's close at 49.47 marks the highest recorded closing price since March 13th. Trading up to $0.49 lower after the open, First American managed to reverse during the session as bulls took control ending the day above its opening price. The last time this happened on May 15th, FAF gained 6.60% on the following trading day. Closing within the prior day's range, prices failed to decisively move beyond the previous day's trading range in a lackluster session.
Daily Candlestick Chart (FAF as at May 22, 2020):
Friday's trading range has been $0.63 (1.28%), that's far below the last trading month's daily average range of $1.77. 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 FAF. Prices continued to consolidate within a tight trading range between 47.56 and 49.53 where it has been caught now for the last three trading days.
One bearish candlestick pattern matches today's price action, the Hanging Man.
After trading down to 48.90 earlier during the day, the share bounced off the key technical support level at 49.34 (S1). The failure to close below the support might increase that levels significance as support going forward. After having been unable to move above 49.48 in the prior session, the market ran into sellers again around the same price level today, missing to move higher than 49.53.
Although the stock is experiencing a short-term uptrend, this could just be a correction, as both the medium and long-term trends are still bearish.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Bounced off Technical Support S1" stand out. Its common bullish interpretation has been confirmed for First American. Out of 441 times, FAF closed higher 58.50% 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 61.68% with an average market move of 0.64%.