UFS finds buyers at key support level
Domtar Corporation (UFS) Technical Analysis Report for Jul 31, 2020 | by Techniquant Editorial Team
UFS ended the month -0.57% lower at 20.99 after edging higher $0.03 (0.14%) today, underperforming the S&P 500 (0.77%). Trading up to $0.46 lower after the open, Domtar managed to reverse during the session as bulls took control ending the day above its opening price. Closing within the previous day's range, prices failed to decisively move beyond the prior day's trading range.
Daily Candlestick Chart (UFS as at Jul 31, 2020):
Friday's trading range has been $0.71 (3.42%), that's slightly below the last trading month's daily average range of $0.81. 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 UFS.
One bullish candlestick pattern matches today's price action, the Hammer. The last time a Hammer showed up on March 19th, UFS actually lost -9.02% on the following trading day.
After trading down to 20.30 earlier during the day, the stock bounced off the key technical support level at 20.63 (S1). The failure to close below the support could increase that levels significance as support going forward. Prices are trading close to the key technical resistance level at 21.54 (R1).
The share shows weakness in the short-term (in accordance with its long-term downtrend) with only the medium-term trend still being bullish.
Among the five market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Hammer" stand out. Although it is usually interpreted as bullish, it has actually shown to be bearish for Domtar. Out of 35 times, UFS closed lower 57.14% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the short side has been after 10 trading days, showing a win rate of 57.14% with an average market move of -1.29%.