Kenvue Surges 3.20% as Bullish Engulfing Pattern and Converging Moving Averages Signal Strong Technical Momentum

Kenvue (KVUE) closed the most recent session with a 3.20% gain, suggesting potential short-term bullish momentum. This price action, combined with recent volatility in the $20.99–$21.93 range, warrants a comprehensive technical evaluation to assess trend strength and potential reversals. Below is a structured analysis across key frameworks.

Candlestick Theory

Recent price action reveals a bullish engulfing pattern on August 12, where the closing price of $21.90 exceeded the prior session’s high of $21.44, signaling strong buying pressure. Key support levels are identified at $21.22 (August 11 close) and $20.97 (August 8 low), while resistance resides at $21.83 (August 8 high) and $22.285 (August 4 high). A break above $21.93 (August 12 high) could target the next resistance at $22.18, whereas a retest of $20.99 may confirm the support’s validity.

Moving Average Theory

The 50-day moving average (calculated as $22.15) is above the 200-day MA ($22.00), indicating a bullish bias in the intermediate term. The 100-day MA ($22.10) aligns with this trend, suggesting confluence. However, the current price of $21.90 is slightly below the 50-day MA, hinting at a potential pullback. A crossover above the 50-day MA would reinforce the bullish case, while a sustained drop below the 200-day MA could signal a bearish shift.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past three sessions, confirming strengthening momentum. The KDJ oscillator shows %K at 82 and %D at 78, nearing overbought territory, which may indicate a short-term topping process. A bearish crossover in the KDJ could precede a correction, particularly if the RSI diverges from price action.

Bollinger Bands

Volatility has widened recently, with the bands expanding from a narrow $21.40–$21.80 range to $20.99–$21.93. The current price of $21.90 is near the upper band, suggesting overbought conditions. A break below the 20-day SMA of $21.65 may trigger a contraction in volatility, aligning with potential support levels.

Volume-Price Relationship

Trading volume surged on the 3.20% rally (16.07M shares), validating the move higher. However, volume has declined on subsequent sessions, raising questions about the sustainability of the upward trend. A surge in volume during a pullback to $21.22 could confirm renewed buying interest, whereas weak volume may signal waning conviction.

Relative Strength Index (RSI)

The 14-day RSI stands at 68, approaching overbought territory. While this aligns with the recent price surge, it does not yet breach the 70 threshold. A move above 70 may trigger profit-taking, but a divergence between RSI and price (e.g., RSI peaking while price continues higher) would caution against overreliance on this signal.

Fibonacci Retracement

Key Fibonacci levels from the May 8 high ($25.17) to June 3 low ($20.81) include 23.6% ($23.00), 38.2% ($22.45), and 61.8% ($21.45). The current price near $21.90 is above the 61.8% retracement level, suggesting a potential retest of $21.45 as a critical support zone.

Backtest Hypothesis

A backtested strategy using RSI to buy below 30 and sell above 70 yielded a 30.52% return over the tested period but underperformed the benchmark by 2.56 percentage points. This suggests that while the RSI-based approach captured some short-term opportunities, it failed to capitalize on broader trends. The low Sharpe ratio (0.24) and zero maximum drawdown highlight its limited risk-adjusted returns, likely due to frequent whipsaws in a volatile market. Integrating Fibonacci retracement levels with RSI signals (e.g., buying at 30 RSI near key support) may improve alignment with structural price behavior, though further testing is warranted.