PGR's Bullish Continuation Hinges on $208.94 Support Amid Overbought RSI and Mixed Technical Signals

Candlestick Theory

The recent price action for The Progressive (PGR) suggests a bullish continuation, with a two-day upward trend closing near the high of the range. Key support levels are evident at $208.94 (November 5 low) and $207.66 (November 6 low), while immediate resistance lies at $210.48 (November 6 high). A break above $210.48 could target $212.37 (November 5 high), aligning with a potential bullish engulfing pattern. However, a failure to hold above $208.94 may trigger a retest of the $207.84–$207.66 support cluster, indicating a possible bearish reversal.

Moving Average Theory

Short-term momentum appears aligned with the 50-day moving average (calculated as the average of October 8–November 7 closing prices), which likely trends upward given the recent gains. The 50-day MA is expected to remain above the 100-day and 200-day averages, confirming an uptrend. A critical confluence occurs if the 50-day MA crosses above the 200-day MA, reinforcing long-term bullish bias. However, the 200-day MA’s position near $230–$240 (based on historical data) suggests the current rally remains within a broader consolidation phase rather than a breakout.

MACD & KDJ Indicators

The MACD histogram shows positive divergence, with the line rising above the signal line as of November 5, indicating strengthening bullish momentum. The KDJ (Stochastic) oscillator, however, signals overbought conditions (K > 80), suggesting caution. While the MACD supports continuation, the KDJ’s overbought reading may foreshadow a near-term pullback. A bearish crossover in the Stochastic oscillator could precede a retest of the $208.94 support level.

Bollinger Bands

Volatility has expanded following the recent rally, with the price near the upper Bollinger Band ($217.43–$210.5). This suggests a potential overextension, increasing the likelihood of a reversion toward the 20-day moving average (around $215–$217). A contraction in the bands could signal a period of consolidation before the next directional move.

Volume-Price Relationship

Trading volume surged on the November 7 up session (5.25 million shares), validating the bullish price action. However, the volume on November 6 (3.33 million) was relatively lower during the 0.32% gain, suggesting waning conviction. A divergence between rising prices and declining volume on subsequent up days may indicate weakening momentum, warranting closer scrutiny of the $208.94 support level.

Relative Strength Index (RSI)

The RSI has crossed into overbought territory (>70) as of November 7, aligning with the recent sharp gains. While this often precedes a correction, the RSI’s failure to form a bearish divergence (price highs vs. RSI highs) implies the uptrend may persist. Caution is warranted, however, as the backtest strategy highlights a historical negative return for overbought RSI conditions.

Fibonacci Retracement

Key Fibonacci levels from the October 15 low ($217.2) to the November 7 high ($217.27) are compressed due to the narrow range. A deeper retracement from the July–August peak ($261.66) to the October 15 low would show critical levels at $244.50 (38.2%), $235.50 (50%), and $226.50 (61.8%). A breakdown below $235.50 could target the $226.50 level, where prior support from October 15–22 may resurface.

Backtest Hypothesis

The backtest strategy’s focus on RSI overbought conditions from 2022 to 2025 reveals a consistent negative return (-0.04% maximum), suggesting that overbought RSI signals are more reliable for identifying potential reversals than continuation. Integrating this into the analysis, PGR’s current overbought RSI (>70) may act as a contrarian indicator, with historical data implying a higher probability of underperformance or a pullback. This aligns with the Bollinger Band overextension and KDJ overbought warning, reinforcing the likelihood of a near-term correction.