Constellation Energy Drops 1.63% as Bearish Engulfing Pattern Emerges Near Key Support Levels

Candlestick Theory

Constellation Energy (CEG) closed at $358.16 on 2025-10-07, down 1.63%, forming a bearish engulfing pattern after a recent rally to $371.31. Key support levels emerge at $355.38 (recent low) and $340.42 (August 2025 trough), while resistance aligns with the 2025-09-03 high of $368.50 and the 2025-08-04 peak of $354.89. The price has tested the $355.38 support twice, suggesting potential consolidation or a breakdown.

Moving Average Theory

The 50-day MA (calculated from recent data) hovers near $360, while the 200-day MA sits at $315.50. CEG’s current price of $358.16 places it in a bullish short-term trend (above 50-day MA) but bearish long-term (below 200-day MA). The 100-day MA at $340.50 acts as dynamic support. A break above $368.50 could trigger a crossover of the 50-day and 100-day MAs, signaling stronger momentum.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the MACD line crossing below the signal line, indicating bearish momentum. The KDJ oscillator shows %K at 22 and %D at 28, suggesting oversold conditions (below 30). However, a divergence exists: while %K is rising, price action remains weak, hinting at potential exhaustion in the sell-off. This confluence of oversold KDJ and bearish MACD may precede a short-term rebound.

Bollinger Bands

Bollinger Bands have expanded recently, with the 20-day volatility at its widest since August 2025. CEG’s price currently trades near the lower band ($355.38), reinforcing oversold conditions. A bounce off the lower band could target the mid-band at $361.73, but a breakdown below the $340.42 level (August 2025 trough) would signal increased volatility.

Volume-Price Relationship

Volume spiked to 2.17 million on the recent 1.63% decline, the highest since early October 2025. This surge in selling volume validates the bearish momentum, particularly as the price consolidates near key support. However, the volume remains below the 3.5 million average for recent rallies, suggesting limited conviction in the downtrend.

Relative Strength Index (RSI)

RSI stands at 29, entering oversold territory (<30). This indicates a potential reversal, though caution is warranted as RSI often lags in volatile markets. A close above $364.10 (2025-10-06 high) could trigger a rebound to 40-50, aligning with the 50-day MA. Divergences between RSI and price action (e.g., RSI rising while price falls) may delay a reversal.

Fibonacci Retracement

Key Fibonacci levels from the 2025-09-03 low ($329.07) to the 2025-10-06 high ($364.1) include 38.2% at $353.50 and 61.8% at $346.30. CEG’s current price of $358.16 is near the 23.6% retracement level ($361.50), suggesting potential for a pullback toward $353.50 before resuming the upward trend.

Backtest Hypothesis

The backtest strategy—buying CEG when RSI exceeds 70 and holding for one week—aligns with its recent overbought conditions (RSI peaked at 100 in 2023–2025). Historical data from 2022–2025 shows a 69.96% strategy return, outperforming the benchmark by 23.80% with a 0% max drawdown. This suggests the strategy’s effectiveness in capturing short-term rebounds post-overbought signals, particularly when combined with oversold KDJ and bearish MACD.