VSTM breaks below Wednesday's low
Verastem Inc. (VSTM) Technical Analysis Report for Jul 09, 2020 | by Techniquant Editorial Team
VSTM ended Thursday at 1.45 losing $0.08 (-5.23%), strongly underperforming the S&P 500 (-0.56%). Today's close at 1.45 marks the lowest recorded closing price since January 7th. Closing below Wednesday's low at 1.49, the market confirmed its breakout through the prior session low after trading up to $0.07 below it intraday.
Daily Candlestick Chart (VSTM as at Jul 09, 2020):
Thursday's trading range has been $0.12 (7.84%), that's slightly above the last trading month's daily average range of $0.11. Weekly volatility is also higher, being slightly above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly higher than usual for VSTM.
Three candlestick patterns are matching today's price action, the Bullish Hikkake Pattern and the Last Engulfing Bottom Pattern which are both known as bullish patterns and one bearish pattern, the Black Candle. The last time a Last Engulfing Bottom Pattern showed up on Monday, VSTM actually lost -6.83% on the following trading day.
Crossing below the lower Bollinger Band for the first time since Tuesday, prices have shown unusually strong downward momentum in the short-term. This could either indicate a potential selling climax after which prices might head back up towards the mean of the Bollinger Bands at 1.72 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. With its 50-day moving average crossing below its 200-day moving average, the stock has entered a so-called "Death Cross" for the first time since January 28th. Showing increasing downward momentum in the short and medium-term the "Death Cross" is known to indicate a potential bear market on the horizon.
With prices trading close to this year's low at 1.23, downside momentum could accelerate should Verastem break out to new lows for the year.
Among the eight market conditions that our pattern recognition engine identified today, the statistics for the Technical Indicators based market condition "Death Cross" stand out. Although it is usually interpreted as bearish, it has actually shown to be bullish for Verastem. Out of 6 times, VSTM closed higher 66.67% 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 66.67% with an average market move of 2.20%.