Affirm Holdings Surges 3.08% as Bullish Engulfing Pattern and Moving Averages Signal Bullish Bias Amid Overbought Conditions

Affirm Holdings (AFRM) closed the most recent session with a 3.08% increase, signaling potential short-term bullish momentum. The stock has exhibited a volatile price trajectory over the past year, marked by sharp intraday swings and multiple reversals. This analysis evaluates key technical indicators to assess the stock’s positioning within its trend, momentum dynamics, and potential inflection points.
Candlestick Theory
Recent price action reveals a bullish engulfing pattern on December 16, where a 11.77% surge followed a prior bearish session, suggesting a reversal from a downtrend. Key support levels are identified at $65.66 (Dec 15 close) and $63.82 (Dec 12 trough), while resistance clusters around $73.98 (Dec 16 high) and $78.98 (Dec 22 high). A breakdown below $65.66 may target $60.85 (June 13 low), while a breakout above $78.98 could test $80.98 (Feb 18 high).
Moving Average Theory
The 50-day moving average (DMA) currently resides at ~$68.50, above the 200-DMA (~$62.00), indicating a bullish medium-term bias. However, the 100-DMA (~$65.50) has lagged, creating a narrowing gap with the 50-DMA that may signal a potential consolidation phase. Price remains above all three DMAs, suggesting an intact uptrend, though a close below the 50-DMA could trigger a reevaluation of trend strength.
MACD & KDJ Indicators
The MACD histogram has shown a recent positive divergence, with rising bars despite a pullback in late December, hinting at strengthening momentum. The KDJ stochastic oscillator indicates overbought territory (K: 82, D: 75) as of December 22, suggesting caution for near-term overextension. However, the K line remains above D, implying a lack of immediate bearish reversal signals. Confluence between MACD divergence and KDJ overbought levels may indicate a high-probability consolidation phase.
Bollinger Bands
Volatility has expanded recently, with the 20-period Bollinger Bands widening from a narrow contraction in early December. AFRM closed near the upper band on December 22, a classic overbought signal. If the bands contract again, it may precede a breakout or breakdown. The mid-band at $72.50 serves as a dynamic support/resistance level; a sustained close below this could trigger a retest of the lower band (~$65.00).

Volume-Price Relationship
Trading volume spiked to $280.89M on December 22, aligning with the 3.08% rally, which validates the move’s strength. However, volume has since declined to ~$65M on the December 19 pullback, suggesting weaker conviction in the downward correction. A failure to sustain elevated volume during follow-through rallies may indicate waning buying interest, while a surge above $300M could reinforce bullish momentum.
Relative Strength Index (RSI)
The 14-period RSI stands at ~68, nearing overbought territory (70 threshold). While this does not yet confirm exhaustion, it warns of potential short-term profit-taking. A close above 70 would strengthen the case for a continuation, whereas a drop below 50 could signal a shift in sentiment. Recent RSI divergence (higher highs in price but lower highs in RSI) on the December 16–19 swing suggests caution for near-term overbought conditions.
Fibonacci Retracement
Applying Fibonacci levels to the Dec 16 (low: $64.9) to Dec 22 (high: $78.57) rally, key retracement levels at 38.2% (~$72.00), 50% (~$71.24), and 61.8% (~$70.50) align with recent price consolidation. A breakdown below 50% could target the 61.8% level (~$69.00), while a retest of the Dec 16 high (~$78.57) would validate the bullish case.
Confluence & Divergence
Confluence is observed between the MACD divergence, Bollinger Band overbought condition, and KDJ overbought reading, collectively suggesting a high probability of near-term consolidation or a pullback. Divergence exists between the RSI and price action on the December 16–19 swing, indicating potential bearish bias despite the overall uptrend. Traders should monitor the 50-DMA and $70.50 Fibonacci level for confirmation of trend integrity.
This analysis underscores a mixed technical landscape: while the medium-term trend remains intact, short-term overbought conditions and divergences imply caution for aggressive longs. Probabilistic outcomes favor a consolidation phase or a test of key support/resistance levels before a directional breakout.