NetApp Falls 4.21% as Bearish Engulfing Pattern and MACD Bearish Crossover Signal Prolonged Downtrend

Candlestick Theory
NetApp (NTAP) closed at $103.84 on January 16, 2026, marking a 4.21% decline. A bearish engulfing pattern is evident in the recent session, where the bearish candle (low: $103.42, high: $109.35) engulfs the preceding bullish candle (low: $108.29, high: $109.99), suggesting a potential short-term reversal. Key support levels align with recent lows at $103.42 and $102.01, while resistance is likely near $107.06 and $107.25. The price action also shows a "dark cloud cover" formation around mid-January, where a bullish candle is followed by a bearish candle that closes near the prior session’s midpoint, reinforcing bearish momentum.

Moving Average Theory
The 50-day moving average (MA) is approximately $105.72, the 100-day MA at $104.60, and the 200-day MA near $103.66. The current price of $103.84 is below all three, indicating a bearish bias. The 50-day MA is approaching a potential death cross with the 200-day MA, which could signal a prolonged downtrend. Short-term momentum is weak, as the 50-day MA has been trending downward, while the 200-day MA remains relatively flat. A break above $107.06 (the 50-day MA’s level a week ago) could trigger a temporary bounce, but sustained recovery would require crossing above the 100-day MA.

MACD & KDJ Indicators

The MACD line is negative, crossing below the signal line in early January, confirming bearish momentum. Recent histogram contractions suggest decelerating selling pressure, but the MACD remains below zero, indicating a continuation of the downtrend. The KDJ oscillator shows the J line dipping below D (oversold territory), with stochastic lines converging near 20–30 levels. However, a bearish divergence is observed between the K and D lines, implying potential for a further decline rather than an immediate reversal.

Bollinger Bands

Volatility has expanded recently, with the bands widening as the price approached the lower band on January 16. This contraction-expansion pattern suggests a potential breakout or breakdown. The price’s proximity to the lower band ($103.42) aligns with Fibonacci retracement levels (e.g., 61.8% at $105.20), where a rebound could occur. However, sustained trading below the 20-day MA (around $106.00) would strengthen the case for a breakdown.

Volume-Price Relationship

Trading volume surged on the January 16 decline (2.8 million shares), validating the bearish move. However, volume has been inconsistent in preceding sessions, with mixed signals between bullish and bearish candles. A follow-through increase in volume on a break below $103.42 would confirm a breakdown, while a volume spike on a rebound above $107.06 could signal a short-term reversal. The lack of sustained volume during recent rallies suggests weak conviction in the bulls.

RSI

The RSI is currently in oversold territory (<30), a classic indicator of a potential bounce. However, historical data shows multiple instances of the RSI dipping below 30 without a corresponding price recovery, indicating a bearish trap. A closing price above $106.00 would be required to confirm a reversal, but as long as the RSI remains below 50, the downtrend remains intact.
Fibonacci Retracement
Key Fibonacci levels from the recent high of $110.51 to the low of $103.42 include 38.2% at $106.80 and 61.8% at $105.20. The price has tested the 61.8% level multiple times, with mixed results. A break below the 61.8% retracement could target the 78.6% level at $103.80, aligning with the recent close. Conversely, a sustained move above $106.80 would invalidate the bearish case, suggesting a potential retracement to the 78.6% level at $107.50.

Convergence and Divergence

Confluence is observed between the RSI’s oversold reading, the bearish engulfing pattern, and the MACD’s bearish crossover, all pointing to a continuation of the downtrend. Divergences arise between the KDJ indicator (suggesting a potential reversal) and the MACD (reinforcing the downtrend), creating uncertainty. Traders should monitor the 50-day MA and key Fibonacci levels for confirmation of either scenario.