U.S. Bancorp Surges 4.57% as Breakout Confirmed by Bullish Moving Averages and Overbought RSI

U.S. Bancorp (USB) surged 4.57% in the most recent session, closing at $48.28 after trading within a $46.39–$48.36 range. This bullish candlestick suggests strong buying pressure, potentially signaling a breakout from a consolidation phase. Key support levels are evident around $46.39 (prior low) and $45.86 (August 21 low), while resistance is near $48.36. The recent rally may indicate a shift in sentiment, but bearish patterns like a bearish engulfing or dark cloud cover could emerge if the price tests these levels with weak volume.

Candlestick Theory

The recent bullish reversal suggests a potential short-term rally, but caution is warranted. A key support level at $46.39 could hold if the price retreats, while a break above $48.36 may target $49.15 (a prior high in late August). However, a failure to sustain above $47.09 (August 15 high) could trigger a retest of the $45.86–$46.17 range.

Moving Average Theory

The 50-day moving average (~$46.70) is above the 200-day (~$45.50), indicating a bullish trend. The 100-day (~$46.30) is converging with the 200-day, suggesting a potential flattening of the long-term trend. Short-term momentum is positive, but the 50-day’s pullback toward $46.70 may act as dynamic support. A cross below $46.39 would raise concerns about a bearish crossover.

MACD & KDJ Indicators

The MACD histogram shows a narrowing bullish divergence, with the line crossing above the signal line, suggesting continued momentum. However, the KDJ (stochastic oscillator) is in overbought territory (K=80, D=75), hinting at a potential pullback. A failure to stay above 70 in the KDJ could signal a reversal, while a break above 85 may extend the rally.

Bollinger Bands

Volatility has expanded, with the price near the upper band at $48.36. This suggests a high-probability continuation of the current move, but a reversal is likely if the price closes below the middle band ($47.32). The narrow bands observed in early August (August 18–20) indicate a pre-breakout consolidation phase, now resolved.

Volume-Price Relationship

Trading volume spiked to 12.68 million shares, the highest in over a month, validating the recent upmove. Sustained volume above 10 million shares on bullish closes would reinforce the trend. Conversely, a drop in volume during further gains may signal waning momentum.

Relative Strength Index (RSI)

The RSI stands at ~75, indicating overbought conditions. While this typically warns of a correction, the RSI has remained above 60 for weeks, suggesting a strong trend. A close below 70 would be a cautionary signal, but a break above 80 could extend the rally.

Fibonacci Retracement

Key Fibonacci levels from the $45.86–$48.36 range are $47.30 (23.6%), $46.70 (38.2%), and $46.10 (50%). A pullback to $47.30 may find support, while a breakdown below $46.70 could target $46.10. A sustained move above $48.36 would invalidate the 50% retracement as resistance.

Backtest Hypothesis

The strategy of buying USB when RSI exceeds 70 and exiting below 70 yielded -34.33% from 2022 to present, underperforming the benchmark by 100.14%. This highlights the risk of relying solely on overbought RSI levels in a trending market. A more robust approach might integrate moving average crossovers and volume confirmation. For example, entering long when the 50-day crosses above the 200-day and RSI > 50, with a stop-loss at the 38.2% Fibonacci level, could better align with the stock’s trend-following nature.