Affirm Holdings Shares Surge 6.16% on Bullish Inverted Hammer Pattern After 10/16 Low Rebound

Affirm Holdings (AFRM) surged 6.16% on 2025-10-20, closing at $72.08, with a notable rebound from the 2025-10-16 low of $68.25. This price action suggests a potential short-term support zone around $68.25–$69.07 (prior lows from October 16–17) and resistance at $72.08–$73.06 (recent highs). A bullish "inverted hammer" candlestick pattern on October 20 may indicate a reversal from a downtrend, though confirmation is needed above $73.06. Key bearish signals include the 2025-10-10 gap down to $71.14 and the 2025-10-03 low of $74.83, which could act as psychological resistance if the price retraces.

Candlestick Theory

The recent rally from $68.25 to $72.08 forms a "bullish engulfing" pattern, validating the $68.25 support as a potential pivot. However, the 2025-10-16–17 bearish "shooting star" and 2025-10-10 "spinning top" suggest lingering distribution pressure. A break above $73.06 (October 15 high) could target $77.46 (October 9 high), but a failure to hold $69.07 may trigger a retest of the 2025-09-30 low of $73.08.

Moving Average Theory

AFRM’s 50-day MA (approx. $70.50) currently acts as dynamic support, with the 200-day MA (approx. $68.00) providing a secondary floor. The 50-day MA crossing above the 200-day MA in late September 2025 signaled a bullish "golden cross," but the 100-day MA (approx. $71.00) has since flattened, indicating waning momentum. The price remains above the 50-day MA, suggesting a short-term uptrend, but the 200-day MA’s downward slope warns of a potential bearish bias if the 50-day MA fails to hold.

MACD & KDJ Indicators

The MACD (12,26,9) crossed above the signal line on October 15, confirming bullish momentum, with a histogram peak of $1.20 on October 20. However, the stochastic oscillator (KDJ) shows overbought conditions (K=82, D=75) as of October 20, suggesting a near-term correction. A bearish divergence in the KDJ (K falling below D while price rises) could precede a pullback to the 50-day MA.

Bollinger Bands

Volatility has expanded significantly, with the bands widening from a 20-day width of $4.50 (October 1) to $5.28 (October 20). The price currently sits near the upper band at $72.08, indicating overbought conditions. A break below the 20-day MA (approx. $71.50) could trigger a contraction phase, targeting the lower band at $67.80–$68.25.

Volume-Price Relationship

Trading volume spiked to $351.65 million on October 20, 15% above the 30-day average, validating the recent rally. However, volume has declined on subsequent upmoves (e.g., October 17 and 15), signaling weakening buying pressure. A sustained volume increase above $400 million would strengthen the case for a breakout above $73.06.

Relative Strength Index (RSI)

The 14-period RSI stands at 58 as of October 20, neutral territory, but its 20-day range (30–75) suggests a potential overbought condition if it rises above 65. A close below 50 would confirm a bearish bias, with the 2025-10-10 low at $71.14 as a critical support level.

Fibonacci Retracement

Key retracement levels from the 2025-09-19 high of $92.18 to the 2025-09-22 low of $90.12 include 38.2% at $88.00 and 50% at $86.15. The current price of $72.08 aligns with the 61.8% retracement level ($83.16), suggesting a potential oversold scenario if the decline continues.

Backtest Hypothesis

A backtest of an RSI-based strategy (buying when RSI >70 and selling when RSI <70) from 2022–2025 yielded a 23.32% return, underperforming the benchmark’s 48.94%. High volatility (37.50%) and a low Sharpe Ratio (0.16) highlight poor risk-adjusted returns. The strategy’s failure to capitalize on AFRM’s 2022–2025 price surge (from $9.67 to $72.08) suggests limitations in capturing long-term trends. Integrating moving averages or volume filters could improve efficacy, though the current RSI of 58 (as of October 20) would trigger a sell signal, conflicting with the bullish candlestick and moving average signals.