ITUB Surges 13.24% on Bullish Technicals as Golden Cross and MACD Divergence Signal Continued Momentum

Candlestick Theory

Itau Unibanco Pref ADR (ITUB) has exhibited a strong bullish bias over the past eight trading sessions, with a 13.24% cumulative gain. Recent candlestick patterns, including higher highs and consistent closing prices near session peaks, suggest sustained buying momentum. Key resistance appears to form at $7.10, the most recent closing level, while critical support lies near $6.78–$6.83, where prior consolidation occurred. A breakdown below $6.78 could trigger a retest of earlier troughs at $6.40–$6.45, while a breakout above $7.10 may target $7.20–$7.30, extending the current rally.

Moving Average Theory

Short-term (50-day) and long-term (200-day) moving averages indicate a structurally bullish setup. The 50-day MA, currently around $6.60–$6.70, has remained above the 200-day MA ($6.45–$6.50), forming a "golden cross" that confirms an uptrend. The 100-day MA ($6.65) aligns with the 50-day, reinforcing the trend’s integrity. Price action above these averages suggests continued institutional buying pressure, though a cross below the 200-day MA could signal exhaustion in the near term.

MACD & KDJ Indicators

The MACD histogram shows expanding positive divergence, reflecting accelerating bullish momentum, while the KDJ indicator (K-line at ~85, D-line at ~80) suggests overbought conditions. However, the KDJ overbought signal’s reliability is tempered by historical data, which indicates mixed outcomes when this condition occurs. A potential correction may be due, but the MACD’s strength suggests any pullback could be shallow. Divergence between KDJ and MACD—overbought vs. strong momentum—highlights a key confluence point where traders should monitor volume for confirmation.

Bollinger Bands

Bollinger Bands have widened significantly in recent sessions, reflecting heightened volatility. The price’s proximity to the upper band ($7.10) aligns with overbought conditions, but the band’s expansion suggests the trend has room to continue. A retest of the lower band ($6.70–$6.75) is probable if volatility contracts, though the current trajectory favors a breakout above the upper band.

Volume-Price Relationship

Trading volume has surged during the rally, particularly in the last three sessions, validating the price increase. However, volume has not yet reached multi-month highs seen during earlier breakouts (e.g., late July), suggesting participation may be selectively strong. A divergence between price highs and declining volume could signal weakening momentum, but for now, the volume profile supports the bullish case.

Relative Strength Index (RSI)

The 14-day RSI sits near 70, indicating overbought conditions. While this level typically warns of potential reversals, the RSI has remained elevated in recent weeks due to the stock’s sustained upward trajectory. A close below 60 would suggest a retracement, but a break above 70 could extend the rally. Caution is warranted, as overbought RSI levels often precede corrections in volatile assets.

Fibonacci Retracement

Applying Fibonacci levels between the recent high ($7.10) and a key support at $6.40–$6.45, critical retracement levels emerge at 38.2% ($6.85), 50% ($6.77), and 61.8% ($6.69). A pullback to the 50% or 61.8% levels could attract buyers, while a breach of the 38.2% level would strengthen the case for a continuation of the uptrend.

Backtest Hypothesis

The KDJ overbought condition, historically mixed in its predictive power for ITUB, underscores the need for caution. While the indicator currently suggests potential exhaustion, historical backtests from 2022 to present reveal that ITUB’s performance during such periods has been influenced by broader market trends and macroeconomic factors, such as interest rate shifts and regional banking sector dynamics. For instance, overbought KDJ readings coincided with corrections in late 2022 but were followed by renewed rallies in early 2023 due to sector-wide reforms. This implies that KDJ signals should be used in conjunction with other metrics, such as moving averages and volume, to avoid false positives.