International Paper Surges 4.27% on Golden Cross and Bullish Candlestick Patterns

International Paper (IP) has experienced a notable 4.27% increase in its most recent trading session, marking a two-day rally with a cumulative gain of 4.90%. This upward momentum suggests potential short-term bullishness, warranting a detailed technical analysis to evaluate trend strength, key levels, and potential reversals.

Candlestick Theory

The recent price action reveals a strong bullish bias, with a two-day candlestick pattern resembling a "harami" or "bullish engulfing" formation. The 4.90% rebound from the October 31 low of $37.70 (a prior support level) indicates a potential short-term reversal. Key support levels to monitor include the 200-day moving average at approximately $45.50 and the October 2025 trough near $36.30. Resistance is currently clustered around the 50-day moving average (~$46.80) and the recent high of $38.18. A break above $38.50 could target the next Fibonacci level at $39.40, while a retest of $36.30 may trigger bearish continuation patterns.

Moving Average Theory

The 50-day moving average (currently ~$46.80) has crossed above the 200-day moving average (~$45.50), forming a "golden cross" that historically signals a bullish trend. The 100-day MA (~$46.20) aligns with the 50-day, reinforcing the uptrend. However, the 200-day MA remains a critical psychological hurdle; a sustained close above $46.80 would confirm a medium-term bullish bias. Short-term traders may also note the 10-day MA (~$38.10) acting as immediate resistance, suggesting momentum could stall if volume wanes.

MACD & KDJ Indicators

The MACD histogram has transitioned from negative to positive territory, with the MACD line crossing above the signal line—a classic golden cross. This aligns with the bullish crossover of the 50/200-day MAs. The KDJ (stochastic oscillator) shows the %K line at 72 and %D at 68, nearing overbought territory (threshold: 80). While this may indicate exhaustion, the divergence between rising prices and moderating RSI (discussed below) suggests caution. A bearish crossover in the KDJ could precede a pullback, particularly if the MACD histogram begins to contract.

Bollinger Bands

Volatility has expanded recently, with the upper band at $38.80 and lower band at $36.00. The current price of $38.10 sits near the upper band, suggesting overbought conditions. A break above the upper band could signal a continuation of the rally, but a rejection here may trigger a retest of the mid-band ($37.40). The narrowest band contraction occurred in mid-October (~$36.50), coinciding with a consolidation phase, indicating that the recent breakout may be a genuine trend resumption.

Volume-Price Relationship

Trading volume has surged on the recent rally, with the November 7 session seeing 6.3 million shares traded—well above the 30-day average of ~4.5 million. This volume confirms the validity of the breakout. However, the October 30-31 sell-off (12.66% drop on 16 million shares) suggests that large institutional players may have liquidated positions, creating a potential overhang. Sustained volume above 5 million shares per session would validate the uptrend, while a sharp decline could signal fading momentum.

Relative Strength Index (RSI)

The 14-day RSI is currently at 62, rising from a 30.6 reading on October 31. While not yet overbought (threshold: 70), the rapid ascent suggests caution. A move above 70 would trigger a classic overbought warning, though the recent divergence between rising prices and moderating RSI (from 65 to 62) hints at potential exhaustion. A drop below 50 would indicate a resumption of bearish pressure, particularly if it coincides with a breakdown below the 50-day MA.

Fibonacci Retracement

Key Fibonacci levels derived from the October 30 low ($37.70) to the November 7 high ($38.18) include 38.2% at $37.95 and 61.8% at $38.05. The current price of $38.10 is testing the 61.8% level, suggesting a potential pullback to the 38.2% or 50% levels. A break above $38.18 would target the $39.40 level (100% extension of the October 30-7 move), though this remains speculative without a corresponding breakout in volume.

Backtest Hypothesis

The MACD-based strategy outlined in the backtest (buying on golden crosses and selling on death crosses from 2022 to 2025) demonstrates mixed effectiveness. While the Q3 2022 golden cross aligned with IP’s strong net income and profit margin expansion, the subsequent death cross in Q4 2022 coincided with industry-specific headwinds (e.g., extreme weather impacting packaging demand). This highlights the importance of incorporating fundamental context into technical signals. The current golden cross, occurring against a backdrop of elevated volatility and sector challenges, may require additional filters (e.g., RSI divergence or volume confirmation) to improve reliability.