MOMO slumps, losing $1.97 (-9.33%) within a single day on high volume
Momo Inc. (MOMO) Technical Analysis Report for May 22, 2020 | by Techniquant Editorial Team
Moving lower for the 3rd day in a row, MOMO finished the week -7.67% lower at 19.14 after tanking $1.97 (-9.33%) today on high volume, notably underperforming the S&P 500 (0.24%) ahead of tomorrow's Memorial Day market holiday. This is the biggest single-day loss in over three weeks. Today's close at 19.14 marks the lowest recorded closing price since January 3, 2017. The bears were in full control today, moving the market lower throughout the whole session. Ending with a weak close near the low of the day sets a bearish note for the next session.
Daily Candlestick Chart (MOMO as at May 22, 2020):
Friday's trading range has been $1.52 (7.39%), that's far above the last trading month's daily average range of $1.05. Weekly volatility is also higher, being way above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for MOMO.
One bearish candlestick pattern matches today's price action, the Black Candle.
Prices broke below the key technical support level at 20.09 (now R1), which is likely to act as resistance going forward. The last time this happened on Wednesday, MOMO lost -2.76% on the following trading day.
Crossing below the lower Bollinger Band for the first time since May 5th, 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 21.93 or signal the beginning of a strong momentum breakout leading to even lower prices.
The trend is clearly bearish, showing an intact downtrend in the short, medium and long-term.
Among the 13 market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Close near low of period" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for Momo. Out of 263 times, MOMO closed higher 58.56% 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 58.94% with an average market move of 2.61%.