Ecopetrol Surges 3.80% on Bullish Continuation Signal Golden Cross Confirms Uptrend Amid Overbought RSI

Candlestick Theory

Ecopetrol's recent price action suggests a bullish continuation. The most recent session saw a 3.80% surge, forming a strong green candle with a long upper wick, indicating aggressive buying pressure. Key support levels emerge at $9.82 (a recent trough) and $9.32 (a prior consolidation level), while resistance clusters at $10.39 (recent high) and $10.58 (intraday peak). A bullish engulfing pattern is evident around November 14, confirming a reversal from prior bearish momentum. However, divergence between candlestick shadows and body length suggests caution: while the recent rally is strong, elongated wicks may signal exhaustion if volume fails to confirm.

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Moving Average Theory

Short-term momentum aligns with long-term trends. The 50-day MA (currently near $9.80) has crossed above the 200-day MA ($9.40), forming a golden cross—a classic bullish signal. The 100-day MA ($9.75) reinforces this, as all three indicators slope upward. Price remains above the 200-day MA, suggesting a sustained uptrend. However, the 50-day MA’s proximity to recent lows ($9.82) implies potential support if the rally stalls. A break below $9.80 would invalidate the bullish case, while a retest of $10.39 could trigger further consolidation.

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MACD & KDJ Indicators

The MACD histogram has turned positive, with the line crossing above the signal line—a buy signal. This aligns with the KDJ stochastic oscillator, which shows the %K line ($10.30) above the %D line ($10.20), indicating overbought conditions. While overbought levels (>70 for KDJ) may hint at a near-term pullback, the MACD’s rising momentum suggests the uptrend remains intact. A divergence between the MACD and price (e.g., lower highs in MACD despite higher price highs) could foreshadow a reversal, but current data shows no such signs.

Bollinger Bands

Volatility has expanded, with bands stretching to $9.82 (lower) and $10.58 (upper). Price is currently near the upper band, reinforcing strength. The 20-period standard deviation (noted in the data) suggests a 68% probability of reversion toward the $10.10 midline if the upper band is breached. However, the recent rally’s volume (e.g., 4.5 million shares on November 14) supports a breakout scenario. A contraction in band width would signal a potential consolidation phase, but current conditions favor continuation.

Volume-Price Relationship

Volume has surged during recent gains, with 4.5 million shares traded on November 14, validating the 3.80% rally. This confirms strong institutional participation. However, declining volume on pullbacks (e.g., 1.5 million shares on November 13) raises questions about sustainability. A sustained increase in volume during up days and contraction during down days strengthens the bullish case, while divergences (e.g., higher highs with lower volume) could signal weakening momentum.

Relative Strength Index (RSI)

The RSI stands at ~72, entering overbought territory. While this suggests a potential correction, it is common in strong trends and should be viewed as a warning rather than a sell signal. A drop below 60 would indicate weakening momentum, but the RSI’s alignment with the MACD and moving averages suggests the uptrend may persist. Overbought conditions often coexist with bullish continuation patterns, particularly when accompanied by high volume.

Fibonacci Retracement

Key retracement levels from the recent high ($10.58) to low ($9.32) include 38.2% ($10.08), 50% ($9.95), and 61.8% ($9.82). The 61.8% level coincides with a prior support zone, making it a critical area to watch. A breakdown below $9.82 could trigger a test of the 100% retracement level ($9.32), where Fibonacci extensions suggest a potential target of $9.00.

Backtest Hypothesis

The backtest strategy—buying when RSI < 30 and selling when RSI > 70 from 2022 to present—generated 4 trades. Given Ecopetrol’s current overbought RSI (~72), the strategy would trigger a sell signal. However, confluence with bullish moving averages, MACD, and volume suggests the uptrend may outlast the RSI’s overbought condition. A revised approach could incorporate a trailing stop-loss at the 61.8% Fibonacci level ($9.82) or use RSI divergence as a filter. For instance, if RSI fails to surpass 70 while price makes higher highs, it could signal a bearish divergence, aligning with the backtest’s exit criteria.

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