NTES dominated by bears dragging the market lower throughout the day
NetEase Inc. (NTES) Technical Analysis Report for Jan 24, 2020 | by Techniquant Editorial Team
Moving lower for the 5th day in a row, NTES finished the week -6.19% lower at 328.15 after losing $6.79 (-2.03%) today on high volume, notably underperforming the Nasdaq 100 (-0.82%). The bears were in full control today, moving the market lower throughout the whole session. Closing below Thursday's low at 332.15, the market confirmed its breakout through the previous session low after trading up to $5.11 below it intraday.
Daily Candlestick Chart (NTES as at Jan 24, 2020):
Friday's trading range has been $12.13 (3.61%), that's above the last trading month's daily average range of $7.71. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently higher than usual for NTES.
In a volatile session, prices traded above the prior day's high as well as below the previous day's low, forming a bearish Outside Bar. Additionally, two candlestick patterns are matching today's price action, the Last Engulfing Bottom Pattern which is known as bullish pattern and one bearish pattern, the Black Candle. The last time a Last Engulfing Bottom Pattern showed up on December 18, 2019, NTES gained 1.85% on the following trading day.
Prices are trading close to the key technical support level at 325.00 (S1). The share closed below the 20-day moving average at 331.22 for the first time since December 31, 2019. After having been unable to move above 339.00 in the prior session, NetEase ran into sellers again around the same price level today, failing to move higher than 339.17.
Though the stock is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
With prices trading close to this year's low at 313.59, downside momentum might accelerate should NTES break out to new lows for the year.
Among the 11 market conditions that our pattern recognition engine identified today, the statistics for the Price Action based market condition "Down Close Near Low of Period" stand out. While it is usually interpreted as bearish, it has actually shown to be bullish for NetEase. Out of 404 times, NTES closed higher 53.71% 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 59.90% with an average market move of 1.81%.