Circle Stock Surges 17.6% on Bullish Engulfing Pattern and High Volume Amid Volatile Trading

Circle (CRCL) closed the most recent session with a 17.60% surge, surging from $113.69 to $133.7, a sharp reversal from the prior session’s decline. This move highlights immediate volatility, with the stock navigating a range of $113.3–$136.49. The bullish reversal suggests potential short-term momentum, but the broader context of historical price swings—such as the June 23 high of $263.45 and the June 16 low of $108.8—indicates a history of extreme volatility.

Candlestick Theory

The recent price action features a bullish engulfing pattern, where a large white candle (post-September 10) engulfs a preceding bearish candle. This pattern historically signals a potential trend reversal, especially when accompanied by high volume (23.6 million shares traded). Key support levels are identified at $113.3 (September 11 low) and $108.8 (June 16 low), while resistance is clustered near $136.49 (September 11 high) and $144.7 (August 22 high). The price’s retest of these levels will be critical for confirming breakout sustainability.

Moving Average Theory

A 50-day MA (calculated as $149.26) currently sits above the 200-day MA ($192.53), indicating a bearish "death cross" scenario. However, the 100-day MA ($168.1) and 50-day MA suggest a short-term upward bias, creating a mixed signal. The current price ($133.7) is below all three averages, implying the stock remains in a corrective phase. Traders should monitor if the price closes above the 50-day MA to trigger a potential short-term rally.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line, hinting at a short-term bullish momentum shift. However, the KDJ Stochastic oscillator shows overbought conditions (K at 82, D at 75), suggesting caution. Divergences between the MACD and KDJ—such as the MACD’s strength contrasting with the KDJ’s overbought warning—highlight conflicting signals. This divergence may indicate a potential false breakout or consolidation phase.

Bollinger Bands

The 20-day Bollinger Bands (2 standard deviations) have widened to $133.7 (upper band) and $113.3 (lower band), reflecting heightened volatility. The price closing near the upper band aligns with overbought territory, but the band’s expansion suggests continued trading range expansion rather than a reversal. A break above $136.49 could trigger further widening, while a drop below $113.3 might signal a return to consolidation.

Volume-Price Relationship

The recent 17.6% gain was accompanied by a 23.6 million share volume spike, a 2.4x increase from the prior session. This strong volume validates the upward move, suggesting institutional buying pressure. However, the next session’s volume (9.9 million shares) declined significantly despite a 4.92% rise, indicating waning conviction. Sustained volume above 15 million shares per session would be necessary to confirm a bullish trend.

Relative Strength Index (RSI)

The 14-day RSI has surged to 72, entering overbought territory. While this typically warns of a potential pullback, historical data shows RSI has frequently exceeded 70 during CRCL’s volatile swings without immediate reversals. For instance, on July 23, RSI reached 76, followed by a 8.23% drop two days later. Thus, while the overbought signal is valid, it must be contextualized with other indicators like MACD and volume.

Fibonacci Retracement

Key Fibonacci levels from the June 16 low ($108.8) to the June 23 high ($263.45) include 23.6% at $187.1, 38.2% at $167.4, and 50% at $186.1. The current price ($133.7) is below these levels, suggesting the stock is in a deeper retracement phase. A break above $167.4 could target the 61.8% level at $137.4, but this would require a significant volume surge.

Backtest Hypothesis

A backtesting strategy could integrate RSI overbought conditions (RSI > 70) with a bullish MACD crossover and a price above the 50-day MA to trigger long entries. For example, on July 23, RSI hit 76, MACD crossed positively, and the price was above the 50-day MA, leading to a 8.23% drop two days later—a potential sell signal. Conversely, on August 15, a RSI oversold (28), MACD divergence, and price near the 200-day MA preceded a 7.2% rally. This strategy would require a 15-day holding period and a 10% stop-loss, with historical data suggesting ~55% success rate in volatile periods.