LUV runs into sellers again around 29.98
Southwest Airlines Company (LUV) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
LUV ended the week 20.95% higher at 28.87 after losing $0.73 (-2.47%) today, significantly underperforming the S&P 500 (0.24%) ahead of tomorrow's Memorial Day market holiday. Closing below Thursday's low at 29.02, Southwest Airlines confirmed its breakout through the prior session low after trading up to $0.70 below it intraday.
Daily Candlestick Chart (LUV as at May 22, 2020):
Friday's trading range has been $1.66 (5.58%), that's slightly above the last trading month's daily average range of $1.63. 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 LUV.
In spite of a strong opening the share closed below the previous day's open and close, forming a bearish Engulfing Candle. Additionally, one bearish candlestick pattern matches today's price action, the Black Candle.
Prices are trading close to the key technical resistance level at 29.73 (R1). After having been unable to move above 30.12 in the prior session, the stock ran into sellers again around the same price level today, missing to move higher than 29.98. The last time this happened on May 15th, LUV actually gained 13.49% on the following trading day.
Though the market is experiencing a short-term uptrend, this might just be a correction, as both the medium and long-term trends are still bearish.
Buying could accelerate should prices move above the nearby swing high at 30.12 where further buy stops might get triggered. As prices are trading close to May's high at 30.96, upside momentum could speed up should LUV mark new highs for the month.
Among the five market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Engulfing Candle" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Southwest Airlines. Out of 120 times, LUV closed higher 57.50% 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 61.67% with an average market move of 1.23%.