LYB breaks below key technical support level
LyondellBasell Industries NV Class A (LYB) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, LYB finished the month -4.87% lower at 62.52 after tanking $2.77 (-4.24%) today on high volume, strongly underperforming the S&P 500 (0.77%) following today's earnings report. This is the biggest single-day loss in over a month. Today's close at 62.52 marks the lowest recorded closing price since June 24th.
Daily Candlestick Chart (LYB as at Jul 31, 2020):
LYB reported earnings of $0.71 per share before today's market open. With analysts having expected an EPS of $0.61, LyondellBasell Industries NV Class A topped market expectations by 16.4%. The company's last earnings report was released on May 1, 2020, when LyondellBasell Industries NV Class A reported earnings of $1.47 per share topping market expectations by 8.9%.
Friday's trading range has been $3.15 (4.91%), that's far above the last trading month's daily average range of $2.12. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for LYB.
One bearish candlestick pattern matches today's price action, the Black Candle.
Prices broke below the key technical support level at 63.52 (now R1), which is likely to act as resistance going forward. The last time this happened on July 9th, LYB actually gained 3.06% on the following trading day.
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 might either indicate a potential selling climax after which prices could head back up towards the mean of the Bollinger Bands at 67.10 or signal the beginning of a strong momentum breakout leading to even lower prices.
While the share is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
Further selling could move prices lower should the market test June's close-by low at 60.04.
Among the 10 market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Gap Down" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for LyondellBasell. Out of 114 times, LYB closed higher 59.65% 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 70.18% with an average market move of 2.85%.