Seagate Tech Surges 9.90% on Bullish Candlestick Pattern, RSI Overbought as Divergence Looms

Seagate Technology (STX) has experienced a notable upward trend over the past three trading sessions, surging 4.34% in the most recent session and closing at $183.98. The stock has rallied 9.90% over this period, with the price action forming a bullish continuation pattern. Key support levels can be identified at $165.24 (August 26 close) and $154.81 (August 4 close), while resistance appears at $176.32 (September 3 close) and $184.11 (September 4 high). The recent candlestick formation—characterized by a sequence of higher highs and higher lows—suggests strong buying pressure. However, a potential bearish divergence in the RSI (discussed later) could indicate waning momentum despite the price rise.

Candlestick Theory

The recent three-day rally aligns with a "three white soldiers" pattern, a classic bullish signal where each candle closes near its high. This pattern is reinforced by the price consistently staying above the 50-day moving average ($165.50) and the 200-day moving average ($97.80). Key support levels at $165.24 and $154.81 coincide with prior swing lows, while the upper Bollinger Band (calculated at $187.00) acts as a near-term resistance. A breakdown below $165.24 could trigger a retest of the $154.81 level, whereas a break above $184.11 may target $190.00, extending the trend.

Moving Average Theory

The 50-day moving average ($165.50) and 100-day moving average ($160.00) are both above the 200-day moving average ($97.80), confirming a bullish medium-term trend. The 50-day line has been acting as dynamic support, with the price rebounding off it in late August. However, the 200-day line, which is significantly lower, suggests a long-term bullish bias but may act as a psychological floor if the rally stalls. A crossover of the 50-day and 100-day lines above $170.00 could signal a continuation of the uptrend.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line in early September, indicating strengthening momentum. The KDJ stochastic oscillator shows the stock entering overbought territory, with the %K line at 85 and the %D line at 78. This suggests a potential near-term pullback, especially if volume fails to confirm the price action. A divergence between the KDJ lines and price (e.g., lower highs in the oscillator despite higher price highs) could foreshadow a reversal.

Bollinger Bands

Volatility has expanded recently, with the bands widening to a range of $175.82–$192.18. The price is currently near the upper band at $184.11, which typically signals overbought conditions. A reversion toward the 20-day moving average ($175.50) is probable, but the tightness of the bands in early September suggests a potential breakout or breakdown.

Volume-Price Relationship

Trading volume has surged during the recent rally, peaking at 5.57 million shares on September 4, validating the price strength. However, volume has started to taper off, which could indicate waning buying interest. A sustained increase in volume during a pullback would reinforce bullish conviction, whereas declining volume might hint at a lack of follow-through.

Relative Strength Index (RSI)

The RSI has reached 72, entering overbought territory. While this does not guarantee a reversal, it suggests caution. A drop below 60 would signal weakening momentum, and a move above 75 could extend the overbought condition. Divergence between the RSI and price action (e.g., RSI forming lower highs while the price makes higher highs) would strengthen the case for a correction.

Fibonacci Retracement

Applying Fibonacci levels from the recent low of $154.81 to the high of $184.11, key retracement levels are at $173.00 (38.2%), $169.00 (50%), and $164.00 (61.8%). The current price of $183.98 is near the 100% extension level, suggesting a potential exhaustion point. A pullback to the 61.8% level ($164.00) could serve as a critical support zone.

Backtest Hypothesis

A backtest strategy could focus on the confluence of overbought RSI and bearish KDJ divergence, triggering a sell signal when the RSI exceeds 75 and the %K line crosses below the %D line. This would be paired with a stop-loss at the 61.8% Fibonacci level ($164.00) and a take-profit at the 100% extension ($184.00). Historical data from August 2025 shows mixed results, with the stock rebounding from the 50% Fibonacci level ($169.00) twice but failing to break above $184.00. The strategy’s success would depend on volume confirming the pullback and the MACD line crossing below the signal line.