Bristol-Myers Squibb (BMY) surges 3.26% as three-day rally lifts shares 4.30% amid bullish technical analysis

Bristol-Myers Squibb (BMY) has experienced a 3.26% increase in its most recent session, marking three consecutive days of gains with a cumulative rise of 4.30%. This short-term momentum aligns with a broader uptrend, warranting a detailed technical analysis to assess its sustainability and potential reversals.

Candlestick Theory

The recent price action reflects a bullish continuation pattern, characterized by three consecutive higher closes, with the most recent session closing near the high of its range ($47.76). Key support levels emerge at $45.59 (November 4 low) and $43.51 (October 23 low), while resistance is clustered around $48.625 (November 21 high). A potential bearish reversal could materialize if the price fails to hold above $45.59, with a doji or a long lower shadow suggesting indecision. Conversely, a break above $48.625 may confirm a shift in sentiment toward a stronger uptrend.

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Moving Average Theory

Short-term momentum is reinforced by the 50-day moving average (estimated at $46.50) and the 100-day moving average ($47.00), both of which the price has crossed above in the past week. The 200-day moving average ($45.20) remains a critical threshold for trend validation; sustained trading above this level would solidify a long-term bullish bias. Confluence between the short- and long-term averages (e.g., 50-day crossing above 200-day) may signal an acceleration in the uptrend, though a divergence between the 50 and 100-day averages (currently converging) suggests caution.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past three days, indicating strengthening bullish momentum, while the signal line remains below the MACD line—a potential early sign of trend continuation. The KDJ (Stochastic) oscillator shows K (85) rising above D (78), suggesting overbought conditions. However, a divergence between the K line and price action (e.g., K peaking before the price does) may foreshadow a pullback. Traders should monitor whether K crosses below D, which could trigger a sell signal.

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Bollinger Bands

Volatility has expanded recently, with the upper band at $48.625 and the lower band at $45.57. The price currently rests near the upper band, signaling overbought territory. A contraction in the bands (expected if the price consolidates) may precede a breakout or breakdown. The mid-band at $47.10 serves as a dynamic support/resistance level; a close below this could indicate weakening momentum.

Volume-Price Relationship

Trading volume has surged on recent up days, particularly on November 24 (27.2M shares) and November 21 (14.2M shares), validating the uptrend. However, the volume on November 19 (14.8M shares) during a 2.7% drop suggests distribution, hinting at potential profit-taking. A divergence between volume and price (e.g., declining volume during a new high) may signal waning conviction.

Relative Strength Index (RSI)

The RSI has climbed to 68 over the past three days, nearing overbought territory. While this does not necessarily signal an immediate reversal, a close above 70 would heighten caution for a short-term correction. Historical context shows the RSI often retraces to the 50-60 range after such spikes, suggesting a probable pullback to test the 50-day moving average.

Fibonacci Retracement

Key retracement levels derived from the recent high ($49.99 on November 13) and low ($43.195 on October 29) include 38.2% at $47.30 and 61.8% at $45.85. The current price near $47.76 aligns with the 38.2% level, which could act as a pivot point. A break below 61.8% would likely trigger a deeper correction toward $43.51, while a breakout above the 38.2% level may target $49.99.

Backtest Hypothesis

A backtest strategy involving buying BMY when the RSI indicates overbought conditions (RSI > 70) and holding for five days revealed mixed results. For instance, an overbought signal on October 19, 2022 (closing at $78.89), yielded a modest 0.08% gain by November 1, 2022 ($78.97). While this approach avoided significant losses, it underperformed the S&P 500’s 1.43% gain during the same period. Recurring performance would require consistent application across multiple timeframes and market conditions, as isolated instances may not generalize. This strategy underscores the importance of combining RSI with other indicators (e.g., volume, Bollinger Bands) to filter false signals and enhance risk-adjusted returns.

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