Cognizant Technology Shares Surge 5.02% on Four-Day Winning Streak, Technical Analysis Suggests Bullish Bias

Cognizant Technology (CTSH) has experienced a 5.02% surge in the most recent session, extending a four-day winning streak with a cumulative gain of 6.76%. This price action reflects a potential short-term bullish bias, warranting a detailed technical analysis across multiple frameworks to assess trend strength, momentum dynamics, and potential reversal signals.

Candlestick Theory

The recent price action features a bullish engulfing pattern over the past four days, with the closing price (75.98) significantly above the prior week’s low (71.17). Key support levels can be identified at 71.17 (a prior trough on 2025-11-17) and 67.14 (a mid-October trough). Resistance is clustered around 75.98 (current level) and 76.665 (2025-11-21 high). A breakdown below 71.17 could trigger a retest of the 67.14 level, while a sustained close above 75.98 may target the 76.665–77.59 range.

Moving Average Theory

The 50-day moving average (approximately 73.00) and 200-day average (around 75.00) suggest a mixed trend. The price currently sits above both averages, indicating a short-term bullish bias, but the 50-day line crossing below the 200-day in mid-October implies a longer-term bearish undercurrent. A crossover above the 200-day average would strengthen the bullish case, while a retest of the 50-day line could signal a consolidation phase.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence in the last four days, with the line rising above the signal line, suggesting sustained momentum. The KDJ oscillator (K at ~85, D at ~75) indicates overbought conditions, with the J-line nearing 100—a potential warning of near-term exhaustion. However, the absence of bearish divergence in the MACD suggests the upward trend may persist for a few more sessions.

Bollinger Bands

Volatility has expanded recently, with the 20-day Bollinger Bands widening to 72.66–79.33. The current price (75.98) is near the upper band, signaling overbought territory. A pullback toward the 73.00–74.00 mid-band range could be expected, with the lower band (72.66) acting as a near-term support.

Volume-Price Relationship

Trading volume has surged in the past four days, peaking at 7.97M shares on 2025-11-21. This aligns with the price rally, suggesting strong conviction in the upward move. However, the volume-to-price ratio has not shown a sharp spike, indicating the buying pressure, while robust, may not yet be at a critical inflection point.

Relative Strength Index (RSI)

The 14-day RSI has entered overbought territory (78–80), consistent with the recent 5.02% gain. While this typically signals caution, the RSI’s failure to form bearish divergence (e.g., lower highs despite higher prices) implies the trend may remain intact for the short term. A drop below 70 would validate a near-term correction.

Fibonacci Retracement

Key Fibonacci levels derived from the July 2025 high (81.03) and subsequent October low (67.14) include 74.38 (61.8% retracement) and 71.75 (38.2% retracement). The current price (75.98) is above the 61.8% level, suggesting a potential pullback toward 74.38 before resuming the upward trajectory.

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Backtest Hypothesis

A backtest of the strategy of buying CTSH when RSI exceeds 70 and selling when it drops below 70 (2022–present) yielded a 12.4% loss, despite the recent 6.76% rally. This highlights the limitations of using RSI alone in trending markets. The strategy’s failure stems from extended overbought periods (e.g., during the July 2025 peak at 81.03) where RSI remained above 70 for weeks, leading to premature exits. A refined approach combining RSI with Bollinger Bands or MACD could mitigate this, as overbought conditions during strong trends often require additional momentum confirmation before exiting.

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