Itau Unibanco Pref ADR (ITUB) Surges 3.61% on Bullish Technicals, Extends 2-Day Rally to 3.77%

Itau Unibanco Pref ADR (ITUB) has seen a 3.61% gain in the most recent session, extending its two-day winning streak with a cumulative rise of 3.77%. The stock has shown a mix of bullish momentum and volatility, with price action oscillating between key levels. Below is a structured technical analysis integrating multiple methodologies to assess the current market dynamics.

Candlestick Theory

Recent price action reveals a bullish continuation pattern, with the stock forming higher highs and higher lows over the past two sessions. A notable support level emerges at $6.69 (August 19 low), while resistance is evident near $6.91 (August 22 high). A small-bodied bullish candle on August 22, following a long bearish shadow on August 19, suggests a potential reversal from oversold conditions. However, the lack of a decisive break above $6.97 (August 18-15 peak) indicates lingering consolidation. Key divergence to watch: if the price fails to surpass $6.97 despite strong volume, it may signal exhaustion in the short-term rally.

Moving Average Theory

Short-term momentum aligns with the 50-day moving average (approximately $6.75), which remains above the 200-day MA (~$6.50), reinforcing an uptrend. The 100-day MA (~$6.65) acts as a dynamic support, currently being tested by the price. A crossover above $6.81 (August 12 high) could validate a bullish breakout, while a drop below $6.65 may trigger a retest of the $6.50–$6.59 range. Long-term investors should monitor the 200-day MA as a critical trend filter; sustained below this level could signal a shift in sentiment.

MACD & KDJ Indicators

The MACD histogram shows expanding bullish momentum, with the line crossing above the signal line in late July. This aligns with the KDJ stochastic oscillator, where %K (30-period) recently crossed above %D, suggesting short-term buying pressure. However, the RSI (discussed below) hovering near 65–70 indicates the stock is approaching overbought territory, which could trigger a pullback. Divergence between MACD and KDJ (e.g., MACD rising while KDJ peaks) may hint at a near-term reversal, particularly if volume fails to confirm further gains.

Bollinger Bands

Volatility has expanded significantly, with the price touching the upper band ($6.91–$6.97) in late August. The bands’ width has widened from ~$0.15 to ~$0.22, reflecting heightened uncertainty. A retest of the lower band ($6.65–$6.69) could provide a buying opportunity, but a breakout above $7.00 would require a new surge in volume. The current position near the upper band suggests caution, as overbought conditions may precede a contraction phase.

Volume-Price Relationship

Volume has surged during the recent rally, with the August 22 session recording 34 million shares traded—a 15% increase from the prior day. This confirms the strength of the bullish move, as rising prices coincide with higher volume. However, if the price advances without a corresponding volume spike, it may indicate waning conviction. Conversely, a sharp drop in volume during pullbacks could signal a lack of selling pressure, supporting a continuation of the uptrend.

Relative Strength Index (RSI)

The 14-day RSI currently stands at ~68, nearing overbought levels. While this suggests the stock is in a strong uptrend, it also raises caution about a potential correction. Historical data shows RSI oscillating between 50–70 over the past month, with no sustained overbought (70+) or oversold (30–) conditions. Traders should monitor for a RSI divergence (e.g., price highs rising while RSI peaks flatten), which may precede a reversal.

Fibonacci Retracement

Key Fibonacci levels derived from the July 15 low ($6.30) to August 12 high ($7.125) are critical. The current price of $6.88 aligns with the 61.8% retracement level, acting as a potential resistance. A break above $6.97 (78.6% level) would target the 100% extension at $7.45. Conversely, a drop below $6.73 (50% level) may retest the $6.60–$6.59 zone.

Backtest Hypothesis

A backtest using RSI-based signals (buy when RSI >50, sell when RSI <50) from 2022 to 2025 yielded moderate returns, capitalizing on oversold conditions but suffering from frequent whipsaws during volatile periods. For instance, the strategy entered positions in late July but exited prematurely during the August 19–20 selloff, missing the subsequent rebound. This highlights the limitations of relying solely on RSI, as it ignores broader market context. Integrating moving averages (e.g., 50-day crossover) or volume filters could improve signal quality by reducing noise and aligning with trend strength.