Affirm Holdings Stock Surges 14.01% on Strong Technical Indicators and Bullish Patterns

Affirm Holdings (AFRM) is currently experiencing a significant upward move, with a 10.59% surge on the most recent session, extending a two-day rally that has driven the stock 14.01% higher. This sharp reversal from earlier volatility suggests a potential shift in sentiment, warranting a detailed technical analysis to assess the sustainability of the rally and identify key levels for future price action.

Candlestick Theory

The recent price action displays a strong bullish bias, with a two-day "harami" pattern forming as the prior bearish candles are engulfed by the recent bullish session. This suggests a short-term reversal in momentum, with key support levels likely forming around the 76.88–77.39 range (a consolidation zone from mid-August) and resistance at 86.76–88.46 (the recent high). The "piercing line" pattern on August 29 further reinforces the bullish case, indicating buying pressure after a prior pullback. However, the absence of a confirmed "three white soldiers" pattern suggests caution—while the immediate trend is positive, a breakdown below 76.88 could signal a resumption of bearish pressure.

Moving Average Theory

Short-term bullishness is confirmed by the 50-day moving average (currently around 74.5) crossing above the 200-day MA (approximately 59.0), forming a "golden cross." The 100-day MA (around 65.0) acts as a dynamic support level, with the price holding above it for the past three weeks. However, the 200-day MA remains a critical long-term barrier; a sustained break above 88.46 would validate a broader uptrend. The convergence of the 50- and 100-day MAs near 74.5 also highlights a potential "confluence zone" for further consolidation or breakout attempts.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the line crossing above the signal line on August 29—a classic buy signal. However, the RSI (at ~72) and stochastic oscillator (KDJ at 82–85) indicate overbought conditions, suggesting a potential pullback. Divergence between the MACD and RSI is notable: while the MACD shows rising momentum, the RSI has flattened, hinting at waning buying pressure. This incongruence raises caution—traders should watch for a breakdown in the KDJ to 50–60 levels as a potential early warning of a reversal.

Bollinger Bands

Volatility has expanded sharply, with the upper band at 88.46 (current price) and the lower band at 74.5. The price is trading near the upper band, indicating high volatility and strong momentum. A contraction in the bands during the week of August 20–23 (narrowing to a 3.5% range) preceded the recent breakout, suggesting the current move could continue. However, a retest of the lower band (74.5–75.0) may be imminent, and failure to hold above this level could signal a resumption of consolidation.

Volume-Price Relationship

Trading volume has spiked on the recent up move (43.2 million shares on August 29), validating the price surge. However, volume has been inconsistent during the rally—while the August 29 session saw robust volume, the prior day’s 3.09% gain occurred on weaker volume (13.98 million). This mixed signal suggests the rally may rely on sustained institutional buying to hold. A drop in volume during the next pullback could indicate waning conviction.

Relative Strength Index (RSI)

The RSI stands at ~72, firmly in overbought territory, with no immediate signs of divergence. Historically, the stock has corrected by 5–10% after reaching similar RSI levels (e.g., the 75.0–80 range in late July). While the RSI has not yet triggered a sell signal, traders should monitor for a bearish crossover in the stochastic oscillator (e.g., K below D at 50) as a potential early warning.

Fibonacci Retracement

Key Fibonacci levels align with recent price action. The 38.2% retracement level (78.5) coincides with the August 18–19 consolidation zone, acting as a potential support. The 61.8% level (85.5) is a critical resistance; a break above this would target the 90.0–95.0 range. The current price near 88.46 suggests a possible test of the 61.8% level in the near term.

Backtest Hypothesis

A hypothetical strategy combining the 50/200-day MA crossover with RSI overbought signals could be tested. For example, entering long on the MA crossover (August 29) while exiting when RSI falls below 60. Historical data from mid-August shows that such a setup would have captured the recent 14% rally but would have required tight stop-loss management due to prior volatility. A backtest should evaluate the win rate of similar setups over the past year, factoring in transaction costs and slippage. Given the recent divergence in momentum indicators, adding a volume filter (e.g., requiring above-average volume on entry) might improve the strategy’s reliability.