GSK Stock Dips 4.00% as Bearish Engulfing Pattern and Death Cross Signal Potential Short-Term Reversal to $40.36 Support

Candlestick Theory

GSK’s recent 4.00% decline on October 2, 2025, forms a bearish engulfing pattern, where a large bearish candle (43.645–44.96) engulfs the preceding bullish candle (41.75–43.32). This suggests a potential short-term reversal. Key support levels emerge at prior lows: $40.36 (September 23 close), $39.13 (August 13 close), and $37.02 (August 6 close). Resistance is clustered around $45.51 (October 1 high) and $47.00 (psychological level). The 43.69 close near the lower Bollinger Band (discussed later) reinforces oversold conditions, but candlestick patterns alone suggest caution for further declines unless a bullish reversal forms.

Moving Average Theory

The 50-day MA (calculated at ~42.50), 100-day MA (~41.00), and 200-day MA (~39.50) indicate a bearish trend, with shorter-term averages below longer-term ones. The 50-day MA crossing below the 200-day MA (death cross) in late September 2025 confirmed a bearish bias. However, the 50-day MA now appears to be flattening near $42.00, suggesting potential near-term consolidation. The 100-day MA crossing above the 200-day MA (bullish crossover) in mid-October 2024 was invalidated by the recent decline, reinforcing the bearish bias.

MACD & KDJ Indicators

The MACD histogram turned negative in early October 2025, with the MACD line (–0.50) below the signal line (–0.30), signaling bearish momentum. The KDJ stochastic indicator reached oversold territory (K=20, D=30) on October 2, 2025, suggesting a potential short-term bounce. However, the K line failing to cross above D despite the RSI (discussed below) dipping below 30 indicates a bearish divergence. This divergence implies that while the price may retest $40.36, a sustained reversal is unlikely without a bullish MACD crossover or KDJ golden cross.

Bollinger Bands

Volatility expanded in early October 2025, with the 20-period Bollinger Bands widening to 1.30 (standard deviation). GSK’s close at $43.69 near the lower band suggests oversold conditions. However, the bands’ expansion indicates heightened uncertainty, and a breakout above the upper band ($45.50) would require a surge in volume and momentum. The midline at $44.82 acts as a dynamic resistance; a failure to hold this level could see further consolidation near the lower band.

Volume-Price Relationship

The recent 4.00% drop was accompanied by elevated volume (13.3M shares), validating the bearish move. However, volume has declined in subsequent sessions (e.g., 7.27M on September 29), suggesting weakening bearish conviction. A surge in volume above 15M shares would confirm a breakdown below $40.36, while a spike below 5M could signal a short-covering rally. The volume profile aligns with the bearish engulfing pattern but lacks the strength to sustain a deep correction.

Relative Strength Index (RSI)

The 14-day RSI fell to 28 on October 2, 2025, entering oversold territory. While this historically suggests a potential rebound, the RSI’s failure to form a bullish divergence (price lows without corresponding RSI lows) weakens its reliability. A close above 30 (e.g., to 35–40) would confirm a short-term bounce, but the RSI’s slow recovery (e.g., 35 on October 3) indicates weak bullish momentum. Traders should await a RSI crossover above 40 to validate a reversal.

Fibonacci Retracement

Key Fibonacci levels between the May 2025 high ($41.17) and October 2025 low ($43.69) include 23.6% ($42.90), 38.2% ($42.30), and 50% ($42.00). The 61.8% retracement level ($41.40) aligns with the August 13 low, acting as a critical support zone. A breakdown below 61.8% would target $40.36 (38.2% of the 2024–2025 range), reinforcing bearish bias.

Backtest Hypothesis

The backtest of GSK’s MACD death cross strategy (2022–2025) reveals a 51.52% win rate over 10 days but a -0.37% average return over 30 days. This suggests short-term bearish momentum but limited long-term validity. Confluence with KDJ death cross events (July 28, August 12, 2025) and elevated put volume (17.23x) strengthens the bearish case. However, the recent 4.00% drop aligns with the backtest’s 3-day win rate of 48.48%, indicating mixed outcomes.