Diageo Jumps 3.6% To Extend Rally As Technicals Signal Bullish Momentum

Diageo (DEO) concluded the latest session at $101.70, marking a significant 3.60% gain and extending its rally to a second consecutive day, resulting in a cumulative 4.35% increase over this period. The following technical analysis synthesizes insights from multiple approaches based on the provided historical price data.
Candlestick Theory
Recent price action shows encouraging signs. The recovery from the July 31st low of $96.45 culminated in a strong bullish candle on August 5th, closing near the session high ($101.70 vs. high $102.64), indicating buying conviction. This move breached the immediate resistance near the $100 psychological level and the July 24th low of $105.48, turning it into support. Key resistance now lies between $104.50-$105.50, an area where multiple prior rallies stalled in late July. Conversely, solid support is evident around $97.00-$97.50, corresponding to the recent swing low and prior consolidation zone.
Moving Average Theory
The interplay of moving averages presents a mixed trend picture. The short-term momentum is improving as the price has pushed above the 50-day moving average (estimated near $104.30), suggesting near-term bullishness. However, resistance near the 100-day moving average (estimated near $104.10) persists. The longer-term outlook remains cautious as the price continues to trade below the significant 200-day moving average (estimated near $106.80), indicating the primary trend is still neutral to bearish. A sustained break above the converging 50-day and 100-day averages would be necessary to signal stronger upside potential towards the 200-day level.
MACD & KDJ Indicators
The MACD histogram shows a clear shift, transitioning from negative territory and expanding upwards, signally building bullish momentum after the July decline. This provides technical confirmation for the recent price surge. Concurrently, the KDJ indicator exited oversold territory (K and D crossing above 20) around late July/early August, aligned with the price bounce. The K line (typically faster) currently holds a healthy lead over the D line, supporting the near-term bullish momentum thesis, though neither is yet near overbought levels, suggesting room for potential further upside before exhaustion signals emerge.
Bollinger Bands
Volatility, as measured by Bollinger Bands, contracted significantly during the July consolidation around the $97-$99 range. The decisive breakout above $100 coincided with band expansion, validating the strength of the move. The price is now positioned between the middle band (approximately $99.50, acting as support) and the upper band (estimated near $104.20, marking the next resistance zone). This positioning above the middle band reinforces the positive short-term bias initiated by the breakout.
Volume-Price Relationship
The recent breakout exhibits supportive volume characteristics. The August 5th surge of 3.60% occurred on significantly higher volume (2.22 million shares) compared to the preceding down days in late July. This volume expansion on a strong up day validates the bullish price action and suggests genuine accumulation. Furthermore, volume increased during the initial rebound days off the $96.45 low, adding confidence to the reversal attempt. Sustained volume on any continued advance will be crucial for maintaining momentum.
Relative Strength Index (RSI)
The 14-day RSI, calculated based on average gains and losses, currently sits around 54. This places it firmly in neutral territory after recently climbing from oversold levels near 29.5 (at the July 31st low of $96.45). While no longer oversold, the RSI also shows no indication of being overbought (>70), supporting the view that the current uptrend could extend further before reaching potential exhaustion. The RSI recovery in sync with the price increase diminishes immediate reversal risks signaled solely by this indicator.
Fibonacci Retracement
Applying Fibonacci retracement levels to the most recent significant swing (the decline from the June 4th peak of $110.82 to the July 31st trough of $96.45) identifies key retracement zones. The 38.2% retracement level near $101.00 provided initial resistance before being breached. The current price action is now challenging the 50% retracement near $103.60. The more critical resistance area aligns with the 61.8% retracement level near $105.30. This $105.30 zone represents a strong confluence area, intersecting with the 200-day SMA and the resistance cluster identified through candlestick analysis. A decisive break above this level would be a significant technical achievement.
Confluence and Divergence
Significant technical confluence exists around the $105.30 level, where the Fibonacci 61.8% retracement, the 200-day moving average, and previous price resistance converge. This represents a major hurdle for the current bullish move. Support confluence is strong around $97.00-$97.50 (swing low, volume profile support). A minor divergence existed during the late July decline where the RSI made a marginally higher low than its late June low while price made a lower low; however, this nascent positive divergence was quickly confirmed by the subsequent strong price and RSI recovery. Currently, the key indicators (MACD turning positive, KDJ bullish cross, volume confirmation, price above key MAs) show general agreement on improving near-term momentum following the breakout.