Nextera Energy's 6.43% 3-Day Rally Driven by Bullish Candlestick Patterns and Rising Moving Averages Amid Overbought RSI Conditions

Candlestick Theory

Nextera Energy (NEE) has exhibited a three-day upward rally, with a 6.43% surge in three sessions, suggesting strong bullish momentum. The recent candlestick pattern features higher closes and narrowing ranges, indicative of a potential continuation of the uptrend. Key support levels are likely to form around the October 2nd low of $77.54, while resistance is expected at the October 7th high of $84.61. A breakdown below $77.54 could trigger a retest of earlier troughs, whereas a breakout above $84.61 may signal a new bullish phase.

Moving Average Theory

The 50-day moving average (estimated at ~$80.50) and 200-day moving average (estimated at ~$75.00) both appear to be trending upward, with NEE’s current price of $83.21 comfortably above these benchmarks. This suggests a medium- to long-term bullish bias. The 100-day moving average (~$81.00) is also aligned with the uptrend, reinforcing the likelihood of sustained momentum. However, a potential convergence of the 50-day and 100-day averages near $81.00 could act as a dynamic support level if the price retraces.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past three days, indicating strengthening bullish momentum. A recent crossover of the MACD line above the signal line further supports a continuation of the uptrend. The KDJ stochastic oscillator shows %K and %D lines in ascending alignment, with %K nearing overbought territory (above 80), suggesting a possible near-term pullback. Divergence between the KDJ and MACD could signal a cautionary signal for aggressive short-term buyers.

Bollinger Bands

Volatility has expanded recently, with the upper band reaching ~$85.00 and the lower band near $75.00. NEE’s current price of $83.21 is positioned closer to the upper band, indicating overbought conditions. A sustained break above the upper band may trigger a continuation of the rally, while a retest of the lower band could offer a buying opportunity. The recent contraction in band width during the October 1–3 rally suggests a potential breakout phase.

Volume-Price Relationship

Trading volume has surged during the three-day rally, with over 16 million shares traded on October 7th, validating the price action’s strength. However, the volume spike coincided with a 1.34% gain, which may indicate exhaustion if it fails to push the price higher in subsequent sessions. A decline in volume amid continued price gains could signal waning conviction, whereas a new volume spike would reinforce the uptrend’s sustainability.

Relative Strength Index (RSI)

The 14-day RSI is likely in overbought territory (above 70) following the rapid 6.43% gain. While this typically warns of a potential pullback, the RSI’s elevated level may persist in a strong uptrend. A drop below 50 could signal a deeper correction, whereas a retest of overbought levels without a bearish reversal pattern may indicate continued bullish momentum.

Fibonacci Retracement

Applying Fibonacci levels between the October 1 low of $76.22 and the October 7 high of $84.61, key retracement levels include 61.8% at $80.20 and 38.2% at $79.10. A retest of the 61.8% level may act as a critical support zone, while a breakdown below 38.2% could trigger further downside toward the October 1 low.

Backtest Hypothesis

The proposed backtest strategy—buying NEE on a MACD Golden Cross with a 15-day holding period from 2022 to 2025—reveals underperformance relative to the benchmark, with a 1.51% return versus the benchmark’s 45.57%. The negative excess return (-44.06%) and low Sharpe Ratio (0.02) highlight poor risk-adjusted outcomes. This divergence between technical indicators (e.g., bullish MACD, RSI overbought) and the backtest results suggests that short-term strategies may struggle in a market environment where NEE’s fundamentals (e.g., renewable energy growth, dividend stability) favor longer-term holding periods. The confluence of strong candlestick patterns and moving average alignment implies that extending the holding period or incorporating Fibonacci retracement levels could improve the strategy’s efficacy.