Diageo Stock Faces Resistance At 200 Day MA As Bearish Signals Mount

Candlestick Theory
Diageo's recent price action shows indecision near the $110–$111 psychological resistance. The last three sessions formed two small-bodied candles (August 14–15) followed by a bearish engulfing pattern on August 18, closing at $110.64 after testing the resistance at $111.71 (August 15 high). This suggests weakening momentum. Key support lies at the August 4 swing low of $96.45, while immediate resistance remains at $111.70–$111.23. The failure to close above $111 despite multiple tests reinforces this zone as a supply area.
Moving Average Theory
The 50-day MA (currently ~$107.80) crossed above the 100-day MA (~$109.20) in early August, signaling a nascent bullish trend. However, Diageo now trades near the 200-day MA ($111.50), which capped rallies twice in the past week. The proximity to the 200-day MA, coupled with flatlining short-term averages, indicates consolidation. A sustained break above the 200-day MA would confirm bullish momentum, while rejection could trigger retracement toward the 50/100-day confluence at $107–$109.
MACD & KDJ Indicators
The MACD histogram turned negative on August 18, with the signal line crossing below the MACD line — a bearish reversal signal. Meanwhile, the KDJ oscillator shows divergence: price made higher highs in mid-August, but the K-line peaked at 82 (August 11) before declining to 65. This bearish divergence suggests weakening upward momentum. The KDJ reading of 65 currently avoids overbought territory (>80) but points to near-term downside pressure.
Bollinger Bands
Volatility expanded sharply during the August 4–11 rally (bands widened from 2.5% to 4.5% daily range). Recent contraction to 3.2% daily range signals reduced volatility and potential directional indecision. Price currently hugs the upper band ($111.60), failing to close above it for three consecutive sessions. This compression near range highs often precedes reversals; a drop toward the middle band ($108.40) or lower band ($105.20) appears probable if support breaks.
Volume-Price Relationship
Volume trends validate skepticism toward recent gains. The August 11 surge to $111.55 occurred on elevated volume (1.55M shares), but subsequent rallies saw volume decline 30–50%. The August 18 down day recorded higher volume (1.39M) than the prior up day (0.71M), confirming distribution. This divergence between price recovery and volume contraction undermines the rally’s sustainability.
Relative Strength Index (RSI)
The 14-day RSI reads 58, retreating from overbought territory (71 on August 11). While still in neutral range, the swift retreat from overbought levels and lower highs in RSI versus price highs indicate fading bullish momentum. A break below 50 could accelerate selling. Caution is warranted as RSI can remain elevated in strong trends, but current readings align with other reversal signals.
Fibonacci Retracement
Using the swing low of $96.45 (August 4) and high of $111.71 (August 15), key Fibonacci levels are: 61.8% ($102.28), 50% ($104.08), and 38.2% ($105.88). Diageo currently holds above the 23.6% retracement level ($108.11). A break below $108.11 would open a path to $105.88. The cluster of Fib levels between $105.88–$104.08 aligns with the 100-day MA, creating a high-probability support zone if a pullback materializes.
Confluence and Divergence
Confluence exists at $105–$107, where the 100-day MA, 50% Fibonacci level, and Bollinger middle band converge — a strong support region. Bearish divergences dominate: MACD reversal, KDJ/price divergence, and weakening volume on rallies. These factors suggest near-term downside toward $107–$108, though broader trend recovery remains plausible if the Fibonacci 23.6% level ($108.11) holds. Traders should monitor the $111.70 resistance and $108.11 support for breakout confirmation.