Estee Lauder Surges 4.48% on Bullish Engulfing Pattern 50-Day MA Crosses 200-Day MA RSI at Overbought 70

The Estee Lauder (EL) recently closed at $87.4, surging 4.48% in a session marked by strong bullish momentum. This move aligns with a Bullish Engulfing candlestick pattern, where the September 15th candle’s body completely overtakes the prior day’s bearish formation, signaling potential trend reversal. Key support levels are evident at $83.65 (September 12th low) and $86.79 (September 11th low), while resistance forms at $88.85 (September 8th high) and $91.93 (September 3rd high). The price has repeatedly tested these levels, suggesting they are critical for near-term direction.

Moving Average Theory

Short-term bullish bias is reinforced by the 50-day moving average (approximately $88.2) crossing above the 200-day MA (around $85.6), indicating a positive medium-term trend. The 100-day MA ($87.1) acts as a dynamic support zone, currently closely aligned with the 50-day MA, suggesting consolidation after recent volatility. However, the 50-day MA’s pullback to $88.2 implies a potential retest of $86.79 as a critical support level if the 50-day MA dips below the 100-day MA.

MACD & KDJ Indicators

The MACD histogram has expanded positively since late August, with the MACD line crossing above the signal line on September 8th, confirming bullish momentum. However, the KDJ (Stochastic) oscillator shows overbought conditions (%K at 83, %D at 79), suggesting potential exhaustion. A bearish divergence emerges as %K fails to surpass prior highs despite rising prices, hinting at a possible pullback. This divergence warrants caution, as it may precede a correction.

Bollinger Bands

Volatility has increased, with Bollinger Bands expanding after a contraction in late August. The price currently hovers near the upper band ($89.88), indicating overbought territory. The 20-day standard deviation suggests a 68% probability of a reversion toward the 88.4–89.4 range. The bands’ width (currently 1.48) underscores elevated volatility, which could persist if the stock breaks above $91.93 or below $86.79.

Volume-Price Relationship

The recent 4.48% gain coincided with elevated volume (3.34 million shares), validating the move’s strength. However, volume has declined in subsequent sessions (e.g., 3.24 million on September 12th), signaling weakening momentum. This mixed signal suggests the rally may lack sustainability unless volume rebounds with further price gains.

RSI Analysis

The RSI stands at 70, entering overbought territory, while the 14-day average gain (3.2%) exceeds the average loss (1.8%), aligning with the recent surge. Historical data shows RSI above 70 for 3 consecutive days in late August, followed by a 3.64% drop, indicating a high probability of near-term correction. However, the stock’s 2025 uptrend has seen RSI remain above 60 for extended periods, suggesting caution against premature shorting.

Fibonacci Retracement

A key Fibonacci retracement level at 50% ($82.5) aligns with the September 11th low ($86.81), creating a confluence of support. If the price breaks below $83.65, the 61.8% retracement level at $81.2 would likely be tested. Conversely, a break above $91.93 would target the 127.2% extension at $95.3, but this requires confirmation via a sustained close above $91.93.

Backtest Hypothesis

A backtest of the RSI overbought strategy since 2022 reveals a 40% 3-day win rate but a -0.47% 30-day return, indicating short-term profitability but long-term underperformance. This suggests overbought RSI signals may capture immediate rebounds but lack sustainability. Integrating this with the current analysis, a hybrid approach—using RSI overbought levels in conjunction with Bollinger Band reversion and moving average crossovers—could improve efficacy. For instance, entering long positions when RSI dips below 60 (after overbought) and the 50-day MA supports the price might mitigate risk while capitalizing on the uptrend.