Brookfield's 4.11% Rally Sparks Bullish Momentum as RSI Hits Oversold Levels and Fibonacci Support at $46.10 Looms

Candlestick Theory

Brookfield’s recent 4.11% rally on October 13, 2025, reflects strong bullish momentum, forming a long white candlestick that suggests institutional buying pressure. Over the past year, the stock has exhibited key support levels around $43.805 (October 13 low) and $44.8 (October 13 close), while resistance clusters near $68.04–$69.68 (August–September 2025 peaks). A notable bearish reversal pattern, the "shooting star," emerged on September 24, 2025, as the price gapped up to $71.68 but closed near the session low at $69.68, signaling potential exhaustion in the upward move. Conversely, a bullish "engulfing" pattern on April 9, 2025, (12.89% gain) marked a strong breakout from a consolidation phase, aligning with a $50.45 peak.

Moving Average Theory

Short-term (50-day) and long-term (200-day) moving averages suggest a mixed trend. The 50-day MA has oscillated between $56–$58 since April 2025, while the 200-day MA remains anchored around $55. The price has recently crossed above the 50-day MA, indicating a potential short-term bullish bias. However, the 200-day MA’s flat trajectory suggests a lack of strong long-term directional momentum. A "Golden Cross" scenario (50-day crossing above 200-day) has not materialized yet, implying caution for long-term investors.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence in late September 2025, with momentum rising despite a pullback in price, hinting at a possible rebound. The KDJ oscillator, however, indicates overbought conditions on October 13 (K = 85, D = 78), aligning with the recent 4.11% surge. Divergence between MACD and KDJ is evident in early October, where the MACD showed weakening momentum while the KDJ remained elevated, suggesting a potential overextension in the rally.

Bollinger Bands

Volatility has expanded significantly since late August 2025, with the bands widening to a 12% range (e.g., $54.11–$68.04 on August 13–14). The current price of $44.8 sits near the lower band, indicating oversold territory and potential for a rebound. A contraction in band width is anticipated if the stock consolidates between $43.805–$45.47, which could precede a breakout.

Volume-Price Relationship

Trading volume spiked on October 13 (2.75M shares) during the 4.11% rally, validating the move’s legitimacy. However, volume has remained subdued in the $43.805–$45.47 range, suggesting limited conviction in the short-term support zone. A sustained increase in volume during an upward break above $45.47 would confirm renewed buying interest.

Relative Strength Index (RSI)

The RSI currently sits at 32, indicating oversold conditions. Over the past year, the RSI has frequently breached the 30 threshold (e.g., May–June 2025), with subsequent rebounds averaging 5–7%. However, the RSI’s inability to hold above 50 since late August suggests a lack of sustained momentum, raising the possibility of a bearish trend resumption.

Fibonacci Retracement

Key Fibonacci levels derived from the $50.45 (April 9) to $43.805 (October 13) swing include:

- 23.6% retracement: $47.30

- 38.2% retracement: $46.90

- 61.8% retracement: $46.10

The price’s current position near the 61.8% level suggests a critical support zone. A break below $46.10 could trigger a test of the 78.6% level at $45.30.

Backtest Hypothesis

The backtest strategy, which buys Brookfield when RSI dips below 30 and sells when it exceeds 70, yielded a 139.45% return from 2022–2025, outperforming the benchmark by 90.75%. While the 27.84% CAGR and 0% max drawdown are impressive, the 56.85% volatility underscores the stock’s inherent risk. The strategy’s success likely stems from capturing short-term rebounds (e.g., the October 13 rally) and avoiding overbought peaks (e.g., the September 24 high). However, the lack of a Sharpe Ratio above 1 (0.49) suggests suboptimal risk-adjusted returns, particularly during high-volatility periods like April–May 2025.