Warner Bros Surges 28.95% on Strong Bullish Candlestick Pattern, Eyes $17.24 Breakout

Warner Bros (WBD) has surged 28.95% in the most recent session, marking a 31.89% rally over two days. The stock’s recent price action suggests a potential breakout, supported by a strong bullish candlestick pattern with a high of $17.24 and a close at $16.17. Key support levels appear to be forming around the $12.05–$12.54 range (August 10–14), while resistance is evident near $17.24. A break above $17.24 could target the next psychological level at $18.00, but a failure to hold above $16.17 may trigger a pullback toward the $12.54–$12.80 consolidation zone.

Candlestick Theory

The recent two-day rally forms a strong bullish reversal pattern, with the first session closing near its high ($12.54) and the second session surging to a new peak. The price has tested the $12.05–$12.54 support range multiple times since mid-August, suggesting a possible base formation. However, the sharp 28.95% spike on 2025-09-11 may indicate short-term overbought conditions. A rejection at $17.24 could lead to a test of the $14.00–$14.50 Fibonacci retracement level, derived from the August 25–July 24 price swing.

Moving Average Theory

The 50-day moving average (calculated at approximately $11.50–$11.80 based on recent data) is significantly below the current price, suggesting a bullish divergence. The 200-day MA (~$10.00–$10.30) remains well below the 50-day, reinforcing an uptrend. However, the 100-day MA (~$11.00–$11.30) is approaching the 50-day, indicating potential short-term congestion. A break above the 200-day MA would signal a stronger bullish case, but the stock’s volatility (evidenced by the 28.95% single-session gain) could create false signals.

MACD & KDJ Indicators

The MACD line has crossed above the signal line, indicating rising momentum. The histogram’s expansion aligns with the recent price surge, suggesting strong buying pressure. Conversely, the KDJ indicator shows the stock is in overbought territory (K at ~85, D at ~80), which may caution against immediate continuation. A divergence between MACD and KDJ could signal a near-term correction, particularly if the RSI fails to confirm the KDJ’s overbought level.

Bollinger Bands

Volatility has spiked, with the 20-period Bollinger Bands widening sharply. The current price sits near the upper band, indicating high momentum. If the bands contract (a “squeeze”), it may precede a breakout. However, the price’s proximity to the upper band also suggests a potential reversal, especially if the RSI or KDJ signals overbought exhaustion.

Volume-Price Relationship

The most recent session’s volume (298.4 million shares) is 5–10x higher than the prior week’s average (~50–70 million), validating the price surge. However, such a surge often precedes a short-term correction unless volume sustains at elevated levels. A decline in volume during follow-through rallies may indicate waning conviction.

Relative Strength Index (RSI)

The 14-period RSI has spiked to ~82–85, entering overbought territory. While this could indicate a continuation of the uptrend, a failure to break above 85 may signal a pullback. A drop below 50 would confirm weakening momentum, but a rebound above 60 could reinvigorate the rally.

Fibonacci Retracement

Key retracement levels from the August 25–July 24 swing (high: $13.70, low: $10.00) include 23.6% at $12.20, 38.2% at $12.70, and 61.8% at $13.20. The stock has tested the 38.2% level multiple times since August, suggesting potential resistance. A break above $13.20 could target the $14.00–$14.50 range, while a drop below $12.20 may retest the $10.00–$10.50 support.

Backtest Hypothesis

A backtest strategy could involve entering long positions when the 50-day MA crosses above the 200-day MA (a “golden cross”) and the RSI dips below 30 (oversold), with a stop-loss below the 200-day MA. Given the recent volatility, a trailing stop-loss at 10% might limit downside risk. However, the stock’s recent overbought conditions and high volume suggest caution—any strategy should incorporate a time-based exit (e.g., 5–7 days) to avoid holding during potential corrections.