Reddit Stock Plunges 7.43% Over Two Days As Bearish Signals Intensify

Reddit (RDDT) declined 5.62% in the most recent session, marking two consecutive days of losses that resulted in a 7.43% cumulative drop, signaling heightened bearish pressure as the stock retreated from recent highs.
Candlestick Theory
Recent sessions display clear bearish momentum, with the August 19 candle closing near its low after rejecting the $238.84 resistance level. This follows a bearish engulfing pattern formed on August 18, where the price opened near $237.54 and closed near $241.76 after peaking at $253.14 – suggesting distribution at higher levels. Immediate support emerges at $225.50 (August 19 low), coinciding with the 50% retracement of the early-August rally, while resistance now solidifies between $238-253. The absence of hammer or bullish reversal patterns near support underscores ongoing downward pressure.
Moving Average Theory
The 50-day MA (currently ~$215) provided dynamic support during the July-August advance but was breached decisively on August 19’s selloff. More critically, the 100-day MA (~$198) and 200-day MA (~$170) maintain upward slopes, confirming the longer-term uptrend. However, the short-term trend has turned negative with price trading below all key moving averages, and the 50-day MA threatening to cross below the 100-day MA – a bearish signal that last preceded May’s 15% correction. The moving average ribbon now exhibits its tightest convergence since March, indicating potential trend inflection.
MACD & KDJ Indicators
MACD charts reflect deteriorating momentum, with the histogram crossing below zero on August 18 and accelerating downward. The signal line rejected a bullish crossover attempt in mid-August, reinforcing resistance near $250. Simultaneously, KDJ shows the %K line (29) crossing below %D (41) from overbought territory (>80 on August 15), completing a bearish momentum cycle. Both oscillators align in signaling fading upside strength, though neither has reached oversold extremes that might suggest capitulation.
Bollinger Bands
Volatility expanded significantly during the August 18-19 selloff, with price breaking below the 20-period moving average (middle band) and testing the lower Bollinger Band near $225. The bandwidth expanded to 11% this week – its widest since March – typically preceding directional moves. Historically, tests of the lower band during uptrends (as seen in June and May) provided buying opportunities, but confirmation requires bullish reversal signals which are currently absent.
Volume-Price Relationship
Distribution signals emerged as the two-day decline occurred on rising volume (6.93M to 8.62M shares), validating bearish conviction. Notable volume spikes coincided with key technical events: the August 1 rally (27.2M shares) confirmed breakout momentum, while the August 19 selloff saw the highest volume in seven sessions. The volume profile highlights significant interest at $200-220, suggesting this zone may provide future support.
Relative Strength Index (RSI)
The 14-day RSI retreated from overbought territory (71 on August 15) to 44 currently, indicating weakening momentum but not yet oversold. Similar RSI rejections from >70 preceded May’s 18% drawdown. While bearish divergence was absent during the August peak, the current reading suggests room for further downside before reaching the <30 oversold threshold that triggered reversals in April and January.
Fibonacci Retracement
Applying Fibonacci levels to the entire rally from the August 2024 low ($52.39) to the August 2025 high ($253.14) shows the current pullback testing the shallow 23.6% retracement at $227.40 – precisely where Friday’s intraday low formed. More critical support emerges at the 38.2% level ($206.50), aligning with the 100-day MA and volume point-of-control. A deeper 50% retracement to $179.50 would still maintain the primary uptrend while matching the June consolidation base.
Confluence and Probabilistic Outlook
The $225-227 zone represents a critical confluence area (23.6% Fibonacci, August 19 low, and lower Bollinger Band). A decisive close below $225 would invalidate this support, opening the path toward $206-215 (38.2% Fibonacci + 100-day MA). Bullish reversal requires recovery above $238 to neutralize immediate downside pressure. Divergences are absent among indicators, collectively pointing to corrective continuation. However, the longer-term uptrend remains intact below $200, and volatility expansion suggests accelerated moves may resolve the current technical compression.