Diageo Jumps 3.6% As Technicals Signal Bullish Reversal

Diageo (DEO) concluded the latest session at 101.70, rising 3.60% and extending its gains over the past two days to 4.35%. This upward momentum forms the immediate context for our technical assessment.
Candlestick Theory
Recent candlesticks demonstrate a notable bullish reversal pattern. The August 4 session formed a hammer (low: 96.45, close: 98.17) after a steep decline, signaling potential exhaustion of selling pressure. This was confirmed by August 5’s robust bullish candle (open near 100.38, close: 101.70), which engulfed the prior three sessions' range. Key resistance is established at 104.32 (July 29 high), while support emerges at 96.45 (August 4 low). A sustained close above 102.64 (August 5 high) could reinforce bullish momentum.
Moving Average Theory
The 50-day moving average (MA) near 105.00 converges with the 100-day MA around 108.50, both trending downward and reinforcing intermediate-term bearish pressure. However, the price recently rebounded from the 200-day MA at 96.50, highlighting this as critical long-term support. The current trading position below the 50-day and 100-day MAs underscores persistent bearishness, though a bullish crossover between the 5-day and 20-day MAs may signal nascent short-term strength.
MACD & KDJ Indicators
MACD (12,26,9) shows a bullish crossover emerging in negative territory, with the histogram turning positive—hinting at building upward momentum. The KDJ indicator (9,3,3) exited oversold conditions (KDJ near 20 on August 1) and now approaches 60, supporting near-term bullish potential. These oscillators align in suggesting a tentative reversal, though MACD’s position below the zero line warrants caution regarding trend sustainability.
Bollinger Bands
Bollinger Bands (20-day, 2σ) contracted sharply in late July, indicating reduced volatility before the recent breakout. The price has surged from the lower band (96.45) to test the middle band (20-day MA at 100.50), closing firmly above it. This breach, coupled with band expansion, implies renewed bullish energy. Upper band resistance near 104.50 now becomes the next test. The bandwidth expansion supports continuation potential if volume persists.
Volume-Price Relationship
The rally’s credibility is bolstered by rising volume: August 4 and 5 recorded 2.44M and 2.22M shares traded respectively, significantly exceeding the 30-day average (~1.4M). This volume surge validates the breakout, suggesting institutional participation. Conversely, the July 31 sell-off (3.07M shares) marked a capitulation low, further supporting the reversal thesis.
Relative Strength Index (RSI)
The 14-day RSI rebounded from oversold (28.5 on August 1) to neutral (56 currently). This exit from oversold territory aligns with the hammer candle and volume surge, reinforcing reversal prospects. While RSI lacks overbought extremes (>70), its upward trajectory supports near-term upside. Historically, RSI divergence warned of July’s downturn (lower highs as price peaked), but no such divergence currently exists.
Fibonacci Retracement
Applying Fibonacci to the decline from the July 23 peak (107.39) to August 4 trough (96.45), key levels emerge: 38.2% (101.00), 50% (101.92), and 61.8% (102.85). The stock closed above the 38.2% level and tested the 50% retracement. Confluence exists at 101.92 (50% Fibonacci) and the psychological 102.00 level, making this a pivotal resistance zone. A decisive break above 102.85 could open a path to 104.32.
Confluence Points and Divergences
Confluence reinforces 96.45–97.00 as critical support, where the 200-day MA, bullish hammer, and oversold KDJ/RSI aligned. Similarly, 101.92–102.85 resistance combines the 50% Fibonacci, descending 50-day MA, and July 29 swing high. No material divergence exists among momentum oscillators currently, though the long-term MA hierarchy (50<100<200) contradicts the short-term bullish structure, necessitating vigilance. Volume-backed clearance of 102.85 would strengthen the reversal thesis, while failure below 100.00 would invalidate it.