Lumentum Holdings (LITE) Gains Momentum with Bullish Convergence of MAs, MACD, and Candlestick

Candlestick Theory
Lumentum Holdings (LITE) has exhibited a strong bullish bias in recent candlestick action, with four consecutive closing sessions above prior highs. A key support level appears to form around $339.03 (12/19 low), while resistance is evident at $391.20 (12/22 high). The recent surge includes a "bullish engulfing" pattern on 12/19-12/22, where the 12/22 candle fully covers the prior bearish session, signaling short-term momentum. Additionally, the price has remained above the 200-day psychological level of $350 since late October, suggesting a structural shift in sentiment.
Moving Average Theory
Short-term momentum aligns with the 50-day moving average (approximately $355–$360 based on recent data), while the 200-day MA (~$340) has been decisively crossed above in late December. The 100-day MA (~$350) acts as a dynamic support. Confluence is strong here: price above all three MAs, the 50/100/200 in ascending order, and a narrowing gap between the 50 and 200-day lines, indicating tightening alignment of intermediate and long-term trends.
MACD & KDJ Indicators
The MACD histogram shows positive divergence, with the line rising above zero since early December, while the signal line crosses upward in late December. This confirms strengthening momentum. The KDJ oscillator (stochastic) has entered overbought territory (>80) since 12/19, suggesting potential exhaustion. However, the %K line remains above %D without bearish crossover, implying the uptrend may persist despite overbought conditions. Divergence between the two indicators (price rising while %K peaks) could signal a near-term correction if volume weakens.
Bollinger Bands
Volatility has expanded sharply since late November, with the 20-day Bollinger Bands widening from ~$15 to ~$50. Currently, price resides near the upper band ($391.20), a classic overbought threshold. Historical data shows a prior contraction in mid-November (11/15–11/19), followed by a breakout. The recent expansion suggests continued high volatility, but a reversal risk exists if the price closes below the middle band ($360–$370).
Volume-Price Relationship
Trading volume has surged alongside the price rally, with the 12/22 session recording 3.1 million shares traded—among the highest volumes in the dataset. This validates the strength of the move. However, a potential concern arises if volume begins to contract while price remains elevated, as seen in late October 2025, which preceded a pullback. For now, volume supports the bullish narrative.
Relative Strength Index (RSI)
The 14-period RSI has spiked above 70 since 12/19, indicating overbought conditions. While this alone does not guarantee a reversal, it aligns with the KDJ’s overbought signal. Historical context shows similar RSI levels in mid-November coincided with a 10% pullback. A bearish divergence may emerge if RSI fails to make higher highs while price does, though current data lacks sufficient breadth to confirm this.
Fibonacci Retracement
Applying Fibonacci levels between the 11/24 low ($266.005) and 12/22 high ($391.20), key retracement levels at 38.2% (~$330) and 50% (~$328.50) now act as critical support. The price has shown resilience above the 61.8% level ($300) in early December, suggesting a strong uptrend. A break below $330 could trigger a test of the 78.6% retracement (~$280), but current momentum favors holding above these thresholds.

Confluence and Divergence
Strong agreement exists between the moving averages and MACD, both confirming a bullish trend. However, the RSI and KDJ overbought warnings suggest caution for short-term traders. Divergence between volume and price (if volume declines) could invalidate the uptrend. Probabilistically, the confluence of bullish patterns and technical alignment increases the likelihood of a continuation, though overbought conditions imply a potential pullback or consolidation phase is probable.