AXP Surges 3.57% as Bullish Momentum Gains on Technical Indicators

Candlestick Theory

American Express (AXP) has shown a strong bullish bias in recent sessions, with a 3.57% rally on the most recent close. Key support levels are evident around $300–$305, where the stock has historically found buying interest during pullbacks. Resistance appears to be forming near $315–$320, as the price tested this range multiple times in July. The recent candlestick patterns, including a bullish engulfing formation on August 22, suggest continuation of the uptrend. However, the absence of bearish reversal patterns like hammers or dojis near overbought levels indicates that the rally may lack immediate exhaustion.

Moving Average Theory

The 50-day, 100-day, and 200-day moving averages confirm a medium-term uptrend, with the 50-day ($305) above the 100-day ($300) and 200-day ($295). The current price of $319.16 sits well above all three, reinforcing bullish momentum. A potential confluence point arises if the 50-day MA crosses above the 100-day MA, which would strengthen the case for a sustained rally. However, the narrowing gap between the 50-day and 200-day averages suggests slowing acceleration, hinting at a possible consolidation phase.

MACD & KDJ Indicators

The MACD (12,26,9) shows a positive crossover with the histogram expanding, indicating growing bullish momentum. The KDJ (Stochastic) oscillator is in overbought territory (K=85, D=78), aligning with the RSI’s overbought reading (discussed below). While this may signal short-term exhaustion, the divergence between the K and D lines (K rising faster than D) suggests the uptrend could persist. A bearish crossover in the KDJ would likely precede a pullback to test the $300 support.

Bollinger Bands

Volatility has expanded recently, with the upper band reaching $325 and the lower band near $290. The current price of $319.16 sits close to the upper band, indicating overbought conditions. If the bands contract in the near term, it may precede a breakout or breakdown. The price’s position near the upper band, combined with high volume, suggests that a continuation of the uptrend is probable unless the bands begin to widen again, signaling renewed volatility.

Volume-Price Relationship

Trading volume has surged on recent uplegs, particularly on August 22 (2.78 million shares), validating the strength of the rally. However, volume has been mixed during pullbacks, with lower volumes observed at key support levels. This suggests that while buying pressure is robust during advances, there is less conviction in the stock’s ability to hold gains during dips. A sustained increase in volume during a test of the $300 support would be critical to confirm the trend’s resilience.

Relative Strength Index (RSI)

The 14-day RSI is currently above 70, indicating overbought conditions. While this typically warns of a potential correction, the RSI has remained in overbought territory for several sessions, suggesting strong momentum. A close below 60 would signal weakening momentum, but a sustained move above 70 implies the uptrend remains intact. Caution is warranted, as overbought readings often precede sharp pullbacks in volatile markets.

Fibonacci Retracement

Key Fibonacci levels derived from the July 17–August 19 rally (high: $324, low: $304) include 38.2% at $313 and 50% at $316. The recent close near $319.16 suggests the stock is testing the 61.8% level ($319), which could act as a dynamic resistance. A break above this level would target the $324–$326 range, while a pullback to the 50% level may find support.

Backtest Hypothesis

The backtest strategy, which involves selling AXP when RSI exceeds 70 and re-entering at support levels, yielded a modest 2.54% return with a Sharpe ratio of 0.13. While the strategy avoided drawdowns, its underperformance relative to the benchmark (-3.95%) highlights limitations in capturing broader market trends. The $300 support level provided a buffer, but the low Sharpe ratio suggests insufficient risk-adjusted returns. This approach is better suited for risk-averse investors prioritizing capital preservation over aggressive growth, as it emphasizes defensive positioning during overbought conditions.