MNK runs into sellers around 1.16 for the third day in a row
Mallinckrodt plc (MNK) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
MNK ended Wednesday at 1.13 flat, slightly outperforming the S&P 500 (-0.46%). Trading up to $0.03 lower after the open, the stock managed to reverse during the session as bulls took control ending the day above its opening price. 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 (MNK as at Sep 16, 2020):
Wednesday's trading range has been $0.09 (8.18%), that's below the last trading month's daily average range of $0.14. 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 lower than usual for MNK. Prices continued to consolidate within a tight trading range between 1.04 and 1.17 where it has been caught now for the last three trading days.
Regardless of a weak opening Mallinckrodt plc managed to close above the prior day's open and close, forming a bullish Engulfing Candle. Additionally, one bullish candlestick pattern matches today's price action, the Bullish Spinning Top.
Prices are trading close to the key technical support level at 1.04 (S1). The share ran into sellers again today around 1.16 for the third trading day in a row after having found sellers at 1.16 in the previous session and at 1.17 two days ago.
Crossing above the lower Bollinger Band, prices have lost at least some of their downward momentum in the short-term and could now be heading back up towards the mean of the Bollinger Bands at 1.44. The last time this happened on August 6th, MNK actually lost -8.28% on the following trading day.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Selling might accelerate should prices move below the close-by swing low at 1.04 where further sell stops could get activated. With prices trading close to this year's low at 1.00, downside momentum might speed up should the market break out to new lows for the year.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "High close to prior two Highs" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for Mallinckrodt plc. Out of 91 times, MNK closed higher 56.04% 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 two trading days, showing a win rate of 61.54% with an average market move of -0.23%.