Sherwin-Williams Surges 3.14% on Bullish Candlestick Reversal and Strong Support Levels

The Sherwin-Williams (SHW) has experienced a 3.14% increase in its most recent session, closing at $368.68. This upward movement aligns with a broader context of volatility observed in the preceding weeks, where prices oscillated between $350 and $370. Key support levels appear to form around $357.74 (a recent low) and $350, while resistance is evident near $369.52 (a recent high). The candlestick pattern suggests a bullish reversal, with a potential hammer formation on the recent session, indicating short-term buying pressure after a period of consolidation.

Candlestick Theory

The price action reveals a strong bullish bias in the near term. A bullish engulfing pattern emerged on September 5, where the candle closed at $372.43 after a 1.82% gain, followed by a pullback that stalled at the $357.74 support level. This suggests that sellers have been ineffective at lower levels, reinforcing the idea that the $357.74–$360.92 range acts as a critical support cluster. Resistance at $369.52 and $372.93 (a prior peak on August 22) may need to be retested for a sustained breakout.

Moving Average Theory

The 50-day moving average (approximately $355–$360) currently sits below the 200-day MA ($360–$365), indicating a potential bearish crossover. However, the recent rally has brought the 50-day MA closer to the 100-day MA ($358–$362), narrowing the gap between short-term and long-term averages. This convergence suggests a possible trend reversal, with the 200-day MA acting as a dynamic support if the price holds above $360. A break above the 50-day MA would strengthen the case for a bullish trend.

MACD & KDJ Indicators

The MACD line crossed above the signal line in late August, confirming a bullish momentum shift. However, the histogram has contracted slightly in recent sessions, hinting at waning momentum. The KDJ indicator (Stochastic) shows the %K line at 78–80 (overbought territory) while the %D line lags behind, creating a potential divergence. This divergence may signal an impending pullback, though the RSI (discussed below) remains in overbought conditions, suggesting caution for short-term traders.

Bollinger Bands

Volatility has increased in the past two weeks, with the bands widening from a narrow contraction in early September. The price has spent the last three sessions near the upper band, indicating strong buying pressure. A break above the upper band ($370–$375) could trigger a parabolic move, while a retest of the lower band ($355–$360) may offer a low-risk entry for long positions if the 50-day MA holds.

Volume-Price Relationship

Trading volume spiked on the September 5 session (3.1 million shares) and again on September 11, correlating with the 3.14% rally. This volume surge validates the strength of the recent upmove, particularly when compared to the muted volume during the August 10–11 sell-off. However, volume has declined slightly in the past two sessions, which may indicate a temporary pause in buying enthusiasm.

Relative Strength Index (RSI)

The RSI has hovered near 70–75 for the past week, signaling overbought conditions. While this is a classic warning sign, the RSI has not yet formed a bearish divergence with price. A drop below 60 would suggest a correction is underway, but a sustained move above 70 would reinforce the bullish case. The RSI’s 14-day average of 65–70 implies the market is in a balanced but stretched state.

Fibonacci Retracement

Key Fibonacci levels from the August 22 high ($372.93) to the September 9 low ($358.56) include 38.2% ($365.50) and 50% ($365.75). These levels have acted as both support and resistance, with the price stalling at $365.78 on September 4 before resuming the upward trend. A break above the 61.8% level ($366.10) would confirm a continuation of the bullish phase.

Backtest Hypothesis

A potential backtest strategy could involve entering long positions when the price crosses above the 50-day MA and the MACD histogram turns positive, while the RSI remains below 70 to avoid overbought extremes. Exits could be triggered by a 10% trailing stop or a KDJ divergence. Historical data from late August to mid-September (e.g., August 22–September 5) shows that such a strategy would have captured a 3.5% gain while avoiding the mid-August volatility. However, the recent overbought RSI and KDJ divergence suggest that the strategy may need to incorporate tighter stop-loss levels to mitigate the risk of a retracement.