Cloudflare (NET) Plunges 7.82% as Technical Indicators Signal Potential Breakdown

Cloudflare (NET) experienced a significant 7.82% decline in the most recent session, closing at $186.96. This sharp drop, coupled with a wide range between the session’s high of $201.90 and low of $185.81, suggests heightened volatility and potential bearish exhaustion. The candlestick pattern indicates a possible breakdown from a prior consolidation phase, with key support levels likely forming near the recent low of $185.81 and historical support at $191.65 (from Jan 6). Resistance remains at $197.77–$204.62, with a failure to reclaim this zone increasing the probability of further downside.

Candlestick Theory

The recent bearish candlestick, characterized by a long lower shadow and wide range, suggests a test of immediate support. A close below $185.81 may confirm a breakdown, while a rebound above $191.65 could signal a counter-trend rally. The formation of a "bearish engulfing" pattern near $197.15 (Dec 31) reinforces the likelihood of continued selling pressure.

Moving Average Theory

Short-term momentum is bearish, with the 50-day MA (calculated from the 2025-10-16 to 2026-01-08 data) likely below the 200-day MA, indicating a bearish crossover. The 100-day MA may act as a dynamic resistance around $195–$200. Convergence of the 50-day and 100-day MAs near $198–$200 suggests a critical zone for trend retesting. A sustained break below this confluence increases the probability of a longer-term downtrend.

MACD & KDJ Indicators

The MACD histogram shows negative divergence, with bearish momentum intensifying as the price declines. The KDJ indicator (stochastic oscillator) is in oversold territory (<30), suggesting potential near-term exhaustion. However, a bearish crossover in KDJ (K < D) may delay a rebound, creating a "sell the bounce" scenario.
Bollinger Bands
Volatility has expanded, with the recent close near the lower band ($185.81–$186.96). This contraction/expansion pattern suggests a possible reversal, though the bearish bias remains intact unless the price closes above the mid-band ($195–$196).

Volume-Price Relationship

Trading volume surged during the 7.82% decline, validating the bearish move. However, the volume-to-price ratio suggests diminishing buying pressure as the price approaches $185.81, hinting at potential support. A follow-through increase in volume during a rebound would confirm a reversal; otherwise, the downtrend may persist.

Relative Strength Index (RSI)

The RSI is in oversold territory (<30), indicating a high probability of a near-term bounce. However, this does not guarantee a reversal, as the RSI remains in a bearish phase (below 50). A failure to break above 40 may signal a deeper correction toward $175–$180.
Fibonacci Retracement
Key retracement levels are forming between the recent high of $213.46 (Dec 10) and low of $185.81 (Jan 8). The 61.8% level at $193.50 and 50% level at $199.64 are critical for trend continuation or reversal. A break below $193.50 increases the likelihood of a test at $180.70 (the 78.6% retracement level).

Confluence and Divergences

Confluence is strongest near $191.65–$193.50, where support from candlestick patterns, Fibonacci levels, and moving averages align. Divergence exists between the oversold RSI and MACD histogram, suggesting a potential false bounce. Traders should prioritize volume confirmation during any countertrend rally.