Credo Technology's 5.74% gap up forms bullish long white candlestick as technical indicators signal uptrend continuation

Candlestick Theory

Credo Technology’s recent price action exhibits a strong bullish bias, as evidenced by the 5.74% upward gap on the most recent session, forming a long white candlestick with a high of 125.44 and a close near the high. This suggests aggressive buying pressure, potentially signaling a continuation of the uptrend. Key support levels are identified at 118.57 (August 11 close) and 110.29 (August 5 close), while resistance aligns with the recent high of 125.44 and the 200-day moving average (calculated at ~112.5 based on historical data). A breakdown below 110.29 could trigger a retest of the 100-day moving average (~105.5), which currently acts as a critical psychological floor.

Moving Average Theory

The 50-day moving average (~118.0) is currently above both the 100-day (~112.5) and 200-day (~105.5) averages, indicating a short-term bullish bias. The price has consistently traded above all three moving averages over the past month, reinforcing the uptrend. A crossover of the 50-day below the 100-day would signal weakening momentum, while a sustained close above the 50-day (~118.0) would strengthen the case for a continuation. The 200-day line, however, remains a distant anchor, suggesting the long-term trend is still in early recovery phases.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence over the past two weeks, with the line crossing above the signal line (a “golden cross”) on August 6, coinciding with a 6.39% rally. This aligns with the KDJ indicator, which peaked at overbought levels (K=90, D=85) on August 12, suggesting exhaustion. However, the subsequent price surge post-August 6 indicates strong follow-through buying, validating the MACD signal. A bearish divergence in the KDJ oscillator (e.g., lower highs in K while price makes higher highs) may emerge if the rally stalls near 125.44, signaling potential overbought exhaustion.

Bollinger Bands

Volatility has expanded in recent sessions, with the price trading near the upper Bollinger Band (calculated at ~125.5) on August 12. This contraction-expansion pattern suggests heightened short-term momentum. A sustained close above the upper band would indicate strong continuation potential, while a retest of the lower band (~112.0) could trigger a rebound. The 20-period Bollinger Band width has widened to 13.5, reflecting increased market participation and reduced consolidation.

Volume-Price Relationship

Trading volume surged to 3.24 million shares on August 12, the highest in over a month, confirming the validity of the 5.74% rally. The volume profile shows a positive correlation with price, with above-average volume accompanying key upmoves (e.g., August 6, 8, and 12). However, a divergence may emerge if volume declines during further rallies, suggesting waning momentum. The On-Balance Volume (OBV) has increased by 12% over the past five days, reinforcing the bullish case.

Relative Strength Index (RSI)

The 14-period RSI reached 72 on August 12, entering overbought territory. While this typically signals a potential pullback, the recent surge in volume and the RSI’s failure to form bearish divergences suggest the uptrend may persist. A drop below 60 would indicate weakening momentum, but a sustained close above 65 would validate continued strength. Historical data shows RSI has remained above 60 for three consecutive weeks, reflecting resilient demand.

Fibonacci Retracement

Applying Fibonacci levels between the May 1 low (40.17) and August 12 high (125.44) identifies key retracement levels at 78.75 (38.2%), 91.50 (50%), and 103.50 (61.8%). The current price of 125.38 sits above the 78.75 level, indicating strong bullish momentum. A retest of the 91.50 level could trigger a consolidation phase, while a breakdown below 103.50 would signal renewed bearish pressure.

Backtest Hypothesis

The backtested strategy of buying CRDO upon a MACD golden cross and holding for 10 days yielded a 237.03% return, far exceeding the benchmark’s 36.85%. This aligns with the technical analysis, as the August 6 golden cross coincided with a 6.39% rally, followed by sustained buying pressure. The strategy’s 0% maximum drawdown and 1.00 Sharpe ratio suggest effective risk management, likely supported by confluence with overbought RSI, expanding Bollinger Bands, and strong volume. However, the 42.49% volatility highlights the need for stop-loss measures, particularly as the RSI approaches overbought levels.