Diageo Jumps 3% On Technical Breakout As Indicators Flash Bullish Signals

Diageo (DEO) closed at 103.9 in the latest session, gaining 3.03% and extending its two-day advance to 3.44%. This analysis evaluates the technical structure using multiple frameworks.
Candlestick Theory
The recent bullish engulfing pattern on July 1st (3.03% gain, closing near the day’s high of 104.52) signals potential reversal momentum after consolidation between 99.39 (June 25 low) and 101.81 (June 24 high). Key resistance is now established at 104.52, followed by the swing high of 106.12 (June 16). Support converges at 101.47-102, reinforced by the June 30 low of 99.68. A close above 104.52 may trigger further upside.
Moving Average Theory
The price trades below all key moving averages (50-day ≈ 107, 100-day ≈ 112, 200-day ≈ 120), confirming the primary downtrend. However, the 50-day MA is flattening, and the July 1 rally brought price within 1.5% of this level. A sustained break above 107 would signal improving intermediate momentum, while the 100-200 day MAs cap longer-term upside.
MACD & KDJ Indicators
MACD shows a nascent bullish crossover as the histogram turns positive after the July 1 surge, suggesting strengthening momentum. KDJ’s %K (28) and %D (22) have emerged from oversold territory (<20) and are rising, supporting near-term recovery potential. Divergence is noted as price made lower lows in late June while KDJ formed higher lows, foreshadowing the current rebound.
Bollinger Bands
July 1’s breakout occurred alongside band expansion (20-day width +12%), indicating volatility breakout from the prior contraction phase. Price closed above the 20-day MA (102.20), testing the upper band (105.40). This configuration signals bullish momentum, though a retreat into the band’s mid-region (102-103) may occur for consolidation before further upside.
Volume-Price Relationship
Breakout volume on July 1 (850,970 shares) exceeded the 20-day average by 15%, validating buyer conviction. Notable accumulation occurred at 100-101 (June 25-30), with volume spikes on down days (e.g., June 16: 2.07M shares) suggesting capitulation. Sustained advances require volume to remain above 800K shares.
Relative Strength Index (RSI)
14-day RSI (44) has rebounded from oversold levels (29 on June 25) but remains below neutrality (50). While not overbought, the indicator’s reversal divergence – price made lower lows in June as RSI formed higher lows – warns of waning downward momentum. Upside may extend toward RSI 55-60 before encountering resistance.
Fibonacci Retracement
Applying Fib levels to the June 4–25 decline (110.82–99.39), resistance emerges at 38.2% (103.75) and 50% (105.10). July 1’s close above 103.75 suggests bullish follow-through toward 105.10 is probable. Confluence exists at this level, aligning with the June 16 high (106.12) and the 50-day MA (107).
Confluence & Divergence
Confluent bullish signals include:
- Candlestick breakout validated by volume
- MACD/KDJ crossovers coinciding with price exceeding Fib 38.2%
- Bollinger expansion closing above mid-band
Key divergence remains the long-term moving average structure (price below 100/200-day MAs). The 105-107 zone represents critical resistance, where the 50-day MA and Fib 50% converge. Failure to breach this area may renew selling pressure.