STM finds buyers at key support level
STMicroelectronics N.V. (STM) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
Moving lower for the 4th day in a row, STM ended the month 1.93% higher at 27.94 after losing $0.35 (-1.24%) today, significantly underperforming the S&P 500 (0.77%). Today's close at 27.94 marks the lowest recorded closing price since July 8th. Closing within the prior day's range, prices failed to decisively move beyond the previous day's trading range.
Daily Candlestick Chart (STM as at Jul 31, 2020):
Friday's trading range has been $0.98 (3.43%), that's above the last trading month's daily average range of $0.81. Weekly volatility is also higher, being above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for STM.
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.
After trading down to 27.60 earlier during the day, the stock bounced off the key technical support level at 27.63 (S1). The failure to close below the support might increase that levels significance as support going forward. When prices bounced off a significant support level the last time on July 9th, STM gained 2.46% on the following trading day. After having been unable to move lower than 27.76 in the prior session, the share found buyers again around the same price level today at 27.60.
Though the market is currently in a short-term downtrend, this could just be a correction, as both the medium and long-term trends are still bullish.
As prices are trading close to July's low at 26.56, downside momentum might speed up should STMicroelectronics N. V. mark new lows for the month.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the Support/Resistance based market condition "Bounced off Technical Support S1" stand out. Its common bullish interpretation has been confirmed for STMicroelectronics N. V.. Out of 303 times, STM closed higher 55.45% 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 56.44% with an average market move of 0.62%.