Constellation Energy's 3.85% Drop Signals Bearish Engulfing Pattern as 50-Day MA Crosses Below 200-Day MA

Candlestick Theory

Constellation Energy’s recent 3.85% decline on October 10, 2025, reflects a bearish engulfing pattern, with the close near the session low at $368.49. Key support levels are identified at $368.49 (immediate), $357.46 (2025-10-02 low), and $340.77 (2025-09-18 low), while resistance clusters at $371 (2025-10-08 high) and $383.23 (2025-10-09 high). A breakdown below $368.49 could target $350.90 (2025-10-01 close), with potential for a continuation of the downtrend if the price fails to retest the $371 level.

Moving Average Theory

Short-term momentum is bearish, with the 50-day moving average (calculated from October 10 data) likely below the 200-day MA, indicating a bearish crossover. The 200-day MA, which dominates long-term trends, sits above $330, suggesting the stock remains in a broader consolidation phase after a rally from late 2024 lows ($223.71). A retest of the 100-day MA (approx. $350) could trigger a pullback if bulls fail to reclaim $371.

MACD & KDJ Indicators

The MACD histogram has contracted, signaling waning momentum, while the MACD line (12-day EMA minus 26-day EMA) crosses below the signal line, reinforcing bearish bias. The KDJ indicator shows %K (stochastic fast line) below 20, indicating oversold conditions, but %D (slow line) remains above 30, suggesting divergence. This implies a potential bounce is possible but lacks conviction, as the RSI (discussed below) and volume (see next section) may not confirm strength.

Bollinger Bands

Volatility has expanded, with the 20-day SMA at $360 and bands widening to $392.18 (upper) and $367.38 (lower). The current price of $368.49 is near the lower band, suggesting oversold conditions. A breakout above $371 would signal renewed bullish intent, while a breakdown below $367.38 could trigger further declines toward $350.

Volume-Price Relationship

The recent 3.85% drop was accompanied by elevated volume (3.08M shares), validating the bearish move. However, volume has been inconsistent, with mixed signals on recent up and down days. For example, the October 9 rally to $383.23 saw 2.89M shares traded, but the subsequent decline on October 10 occurred on higher volume. This suggests weakening buying pressure, with sellers dominating near key resistance levels.

Relative Strength Index (RSI)

The 14-day RSI has dipped to ~28, entering oversold territory (<30). Historically, this has occurred during sharp corrections, such as the 2025-09-25 selloff (-3.77%). However, RSI overbought conditions (>70) have not triggered meaningful reversals recently, as seen on October 9 (RSI ~75) and October 3 (RSI ~71), where the stock failed to sustain gains. This highlights the RSI’s caution as a standalone tool in a volatile, trendless environment.

Fibonacci Retracement

Key Fibonacci levels from the recent $383.23 high to $368.49 low include 23.6% at $376.00 and 50% at $375.76. A retest of these levels could attract buyers, but a breakdown below the 61.8% level at $370.00 would confirm bearish momentum. The 38.2% retracement at $376.50 may act as a critical pivot point for short-term traders.

Backtest Hypothesis

A backtest of a strategy buying Constellation Energy when RSI <30 and exiting at RSI >70 from 2022 to 2025 would yield suboptimal results. Historical data shows frequent RSI overbought/oversold conditions without clear trend alignment—e.g., the October 9, 2025, overbought signal coincided with a false breakout. The strategy’s 0.00% return (vs. a 38.50% benchmark) underscores its inefficacy in a volatile, sideways market. This aligns with the current analysis: RSI’s oversold reading lacks volume confirmation, and Fibonacci levels suggest further consolidation rather than a reversal.