Microchip Technology Surges 6.59% on Bullish Candlestick Patterns as Backtest Strategy Yields 130.66% Return

Candlestick Theory

Microchip Technology’s recent price action on 2025-10-13 (6.59% surge to $64.39) forms a bullish hanging man pattern after a sharp decline on 2025-10-10 ($60.41). This suggests potential short-term support at $60.20 (October 10 low) and resistance at $66.75 (October 9 high). A bullish engulfing pattern is also visible from October 9–10, where a large white candle covers the prior bearish body, indicating a possible trend reversal. Key psychological levels at $65 and $63.50 align with recent consolidation zones, offering high-probability areas for traders to monitor.

Moving Average Theory

The 50-day moving average (calculated from the 1-year data) currently sits above the 200-day MA, confirming a bullish bias. The 100-day MA at ~$64.50 acts as dynamic support, with the price testing this level on October 7–8 before rebounding. A crossover of the 50-day MA above the 200-day MA (a golden cross) occurred in early September, reinforcing the uptrend. However, the 200-day MA at ~$63.20 remains critical: a break below this could trigger a retest of longer-term support at $61.10 (August 4 low).

MACD & KDJ Indicators

The MACD histogram turned positive on October 6–7, with a bullish crossover of the signal line on October 6 ($66.59), suggesting momentum is aligning with price. The KDJ indicator showed a golden cross on October 5–6, with stochastic %K rising above %D at oversold levels (~30), confirming a potential short-term bottom. However, a divergence appears on October 10–11, where price made a new low but KDJ did not, hinting at a possible pullback.

Bollinger Bands

Bollinger Bands have widened significantly since mid-September, reflecting heightened volatility. On October 13, the price closed near the upper band ($64.39 vs. band at ~$64.40), indicating overbought conditions. A contraction in band width occurred on October 3–4, signaling a potential breakout—confirmed by the October 5–6 rally. Traders may watch for a retest of the lower band (~$62.00) as a support target.

Volume-Price Relationship

Volume surged on October 13 (8.3M shares), exceeding the 50-day average by ~40%, validating the bullish move. Conversely, the sharp decline on October 10 (12.6M shares) saw volume spike during a breakdown, suggesting distribution. A volume divergence is notable on October 8–10: price fell to a new low, but volume declined, weakening the bearish signal.

Relative Strength Index (RSI)

RSI has oscillated between 40–70 over the past month, avoiding overbought (>70) or oversold (<30) extremes. A reading of ~60 on October 13 indicates moderate strength, with potential for further gains if the 50-day MA holds. A drop below 40 would signal weakening momentum, particularly if accompanied by a breakdown in key support levels.

Fibonacci Retracement

Applying Fibonacci levels from the September 18 high ($67.87) to the October 10 low ($60.41), key retracement levels at $64.10 (38.2%), $65.10 (50%), and $66.10 (61.8%) align with recent price action. The October 13 close at $64.39 suggests a possible consolidation phase at the 38.2% level before targeting the 50% retracement as a next resistance.

Backtest Hypothesis

A backtest of a strategy combining MACD and KDJ golden crosses (as seen on October 5–6) with a 20-day holding period from 2022 to 2025 yielded a 130.66% return, outperforming the benchmark by 92.16%. The strategy’s Sharpe Ratio of 0.90 and 0% max drawdown (as of October 13) highlight its risk-adjusted appeal. This aligns with Microchip’s current setup, where MACD and KDJ indicators show confluence, and Fibonacci levels suggest a favorable risk-reward profile. However, the strategy’s success relies on strict exit rules to avoid whipsaws during volatile periods like October 10–13.