MCHP stuck within tight trading range
Microchip Technology Incorporated (MCHP) Technical Analysis Report for Mar 26, 2020 | by Techniquant Editorial Team
Moving lower for the 2nd day in a row, MCHP finished Thursday at 74.52 edging lower $0.41 (-0.55%) on low volume, significantly underperforming the Nasdaq 100 (5.72%). Closing within the prior day's range, prices missed to decisively move beyond the previous day's trading range in a lackluster session.
Daily Candlestick Chart (MCHP as at Mar 26, 2020):
Thursday's trading range has been $3.81 (5.05%), that's far below the last trading month's daily average range of $6.28. Things look different on the weekly timeframe, where the market's trading range of the last week has been slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for MCHP. Prices continued to consolidate within a tight trading range between 69.89 and 78.33 where it has been caught now for the last three trading days.
Prices are trading close to the key technical resistance level at 78.33 (R1).
Although 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. With its 50-day moving average crossing below its 200-day moving average, the share has entered a so-called "Death Cross" for the first time since March 14, 2019. Showing increasing downward momentum in the short and medium-term the "Death Cross" is known to indicate a potential bear market on the horizon. When the last "Death Cross" happened on August 30, 2018, MCHP actually gained 0.56% on the following trading day.
Buying could speed up should prices move above the nearby swing high at 78.33 where further buy stops might get triggered.
Among the three market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Death Cross" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Microchip Technology. Out of 6 times, MCHP closed higher 83.33% 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 66.67% with an average market move of 2.27%.