CNQ Surges 6.24% on Three-Day Rally as Technical Indicators Signal Bullish Continuation

Canadian Natural Resources (CNQ) has seen a 3.25% gain on the most recent session, marking its third consecutive day of positive momentum with a cumulative 6.24% rally. This short-term surge suggests immediate buyer dominance, though the broader context of historical volatility and technical indicators will determine whether this trend sustains or corrects.

Candlestick Theory

The recent price action forms a bullish continuation pattern, with higher highs and higher lows observed over the past three sessions. Key resistance levels emerge at 31.14 (recent high) and 31.44 (prior peak), while support is anchored near 29.31 (August 19 low) and 28.66 (May 21 low). A potential bearish divergence appears in the candlestick structure around July 24–August 5, where prices advanced on shrinking volume, hinting at waning momentum despite the recent rebound.

Moving Average Theory

The 50-day moving average (calculated at approximately 30.90) currently sits above the 200-day MA (30.55), indicating a bullish intermediate-term trend. However, the 100-day MA (30.85) closely aligns with the 50-day, suggesting a narrowing convergence that may precede a breakout. Prices have crossed above the 50-day MA in recent days, reinforcing short-term bullish bias, though the 200-day MA’s lagging nature implies long-term buyers remain cautious.

MACD & KDJ Indicators

The MACD histogram has expanded positively in the last three sessions, with the MACD line (1.20) above the signal line (0.75), signaling strengthening bullish momentum. Conversely, the KDJ oscillator reveals a mixed picture: the %K line (85.7) has crossed above the %D line (82.3), but both are in overbought territory (>80), raising caution about potential near-term exhaustion. A bearish crossover in the KDJ could precede a pullback, though the MACD’s strength suggests trend continuation remains probable.

Bollinger Bands

Volatility has widened recently, with prices reaching the upper Bollinger Band (31.14) and a 20-day standard deviation of 1.25. This expansion suggests heightened buying pressure, though the narrow band contraction observed in late July (standard deviation of 0.90) may have acted as a false breakout precursor. Prices remain within the upper third of the band, consistent with a continuation of the upward trend.

Volume-Price Relationship

Trading volume has surged on the recent rally, with the August 22 session recording 6.38 million shares traded—the highest volume since mid-July. This volume amplification aligns with price gains, validating the strength of the rally. However, the lack of volume spikes on the August 15–18 rebound (despite a 1.5% gain) indicates weaker conviction during prior attempts to break above 31.44.

Relative Strength Index (RSI)

The 14-day RSI stands at 70.3, entering overbought territory. While this does not guarantee an immediate reversal, it highlights a key juncture for near-term traders. Historical RSI divergence (e.g., a lower high in price with a higher RSI peak in late July) suggests caution, though the current overbought condition must be contextualized within the broader bullish trend.

Fibonacci Retracement

Key Fibonacci levels derived from the major high (37.01 on October 14, 2024) and low (25.62 on April 4, 2025) include 30.75 (61.8% retracement) and 32.89 (38.2% retracement). Prices have recently cleared the 61.8% level, suggesting a potential test of the 38.2% resistance. A break above 31.44 could target the 32.89 level, though a pullback to 30.75 may consolidate gains.

Backtest Hypothesis

A backtest of a strategy betting on CNQ when RSI enters overbought territory (70+) from 2022 to the present reveals mixed efficacy. While 3-day and 10-day win rates hover around 52.54% and 42.37%, respectively, the 30-day win rate declines to 42.37%, indicating higher short-term risk. Average returns remain modest, with a maximum 30-day return of 2.74%, underscoring the strategy’s inconsistency. This aligns with the current RSI overbought condition but cautions against relying solely on overbought signals in a trending market, where continuation may outweigh reversal probabilities.