UAL Surges 10.23% on Three-Day Rally, Gaining 11.92% as Technical Indicators Signal Bullish Momentum

United Airlines Holdings (UAL) has surged 10.23% in the latest session, extending a three-day rally with a cumulative gain of 11.92%. This sharp upward move warrants a detailed technical analysis to assess its sustainability and potential for further gains. Below is a structured evaluation using the specified frameworks.

Candlestick Theory

The recent price action exhibits a bullish continuation pattern, with the stock closing near its intraday high on elevated volume. Key support levels are emerging at $89.33 (August 11 close) and $87.98 (August 7 low), while resistance is clustered around $98.85 (August 12 high). A breakout above this resistance would likely target the next psychological level at $100. Conversely, a pullback to the $89.33 support could trigger a test of the $87.98 level, where prior consolidation may provide a floor. The formation of long upper shadows in recent sessions suggests strong buying pressure but also hints at potential exhaustion if the rally stalls near $100.

Moving Average Theory

Short-term momentum is robust, with the 50-day moving average (calculated from the provided data) currently above the 100-day and 200-day averages, indicating a bullish trend. The 50-day MA is positioned to cross above the 100-day MA, reinforcing the upward bias. However, the 200-day MA acts as a critical long-term reference point; if the price remains above this line, the uptrend remains intact. A breakdown below the 200-day MA would signal a shift to a bearish bias, but current data suggests the 200-day MA is acting as dynamic support.

MACD & KDJ Indicators

The MACD histogram shows positive divergence, with the MACD line crossing above the signal line, suggesting momentum is accelerating. The KDJ oscillator is in overbought territory (K > D and both above 80), aligning with the RSI’s overbought condition. While this typically warns of a potential pullback, the absence of bearish divergence in the MACD and the strong volume profile suggest the trend may continue. A bearish crossover in KDJ could trigger a short-term correction, but confirmation via price action (e.g., a rejection at $98.85) would be necessary.

Bollinger Bands

Volatility has expanded significantly, with the price hovering near the upper Bollinger Band. This contraction-to-expansion pattern is characteristic of a breakout phase. If the price sustains above the upper band, it validates the bullish momentum. However, a retest of the lower band ($87.98–$89.33) could occur if the upper band fails to hold, creating a trading range. The width of the bands also indicates heightened volatility, which may persist as the stock consolidates or accelerates.

Volume-Price Relationship

The recent rally is supported by surging volume, particularly on the August 12 session, where $115.46 million in volume underscores strong institutional buying. This validates the price action’s reliability. However, if volume tapers off while the price continues to rise, it may signal waning momentum. Conversely, a surge in volume during a pullback could indicate accumulation, suggesting the rally is not over.

Relative Strength Index (RSI)

The RSI is in overbought territory (>70), a classic warning of potential exhaustion. However, in a strong uptrend, RSI can remain elevated for extended periods. A failure to close below the 70 threshold would confirm the trend’s strength, while a drop below 60 would indicate a possible retracement. Divergence between the RSI and price (e.g., lower highs in RSI despite higher price) would heighten caution, though current data shows no such divergence.

Fibonacci Retracement

Key Fibonacci levels are forming between the July 17 low ($85.81) and the August 12 high ($98.85). The 23.6% retracement level at $94.32 and the 38.2% level at $92.38 are critical. A retest of these levels during a pullback could offer buying opportunities. A breakdown below the 50% level ($92.32) would invalidate the bullish case, while a breakout above $98.85 would target the 61.8% level at $90.00.

Backtest Hypothesis

The backtest strategy, which triggers long positions when RSI > 70 and KDJ > 80, achieved a 90.72% return from 2022 to the present, outperforming the benchmark by 57.50% with a CAGR of 20.23%. This suggests that overbought conditions in UAL historically coincide with continuation rather than reversal, particularly in a strong sector. The zero maximum drawdown is statistically improbable, likely reflecting favorable market conditions during the test period (e.g., post-pandemic recovery, airline sector outperformance). While the strategy’s success is notable, its reliance on overbought signals necessitates caution, as prolonged overbought conditions can precede sharp corrections. The current alignment of RSI, KDJ, and volume supports the strategy’s logic, but monitoring for divergences or declining volume will be critical to avoid false signals.