Phillips 66 Surges 5.42% on Bullish Engulfing Pattern as Moving Averages and RSI Signal Strengthening Uptrend

Candlestick Theory

Phillips 66 (PSX) has exhibited a bullish engulfing pattern over the past two sessions, with a 5.42% price surge to $136.59. This suggests strong buying pressure following a consolidation phase. Key support levels are identified at $129.72 (September 19 low) and $128.36 (September 10 low), while resistance lies at $133.14 (September 17 high) and $134.755 (September 16 high). A break above $137.69 (September 24 high) could signal a continuation of the uptrend, though a rejection here may trigger a pullback to test the $129.72 level.

Moving Average Theory

The 50-day moving average (calculated as $131.50) is above the 200-day MA ($125.40), confirming a bullish intermediate trend. The 100-day MA ($129.20) acts as a dynamic support. PSX’s current price of $136.59 sits well above all three moving averages, reinforcing a long-term uptrend. A crossover of the 50-day MA below the 200-day MA would signal caution, but the current alignment supports maintaining exposure.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line, indicating strengthening momentum. The KDJ indicator shows the K-line at 85 and the D-line at 78, nearing overbought territory. While this suggests potential exhaustion, the absence of a bearish divergence (price rising while K/D lines peak) implies the uptrend may persist. A reversal below the 50-day MA could trigger a KDJ sell signal.

Bollinger Bands

Volatility has expanded, with the upper band at $139.00 and the lower band at $124.00. PSX’s price is currently near the upper band, indicating overbought conditions. A break below the $133.14 level could drive the price toward the middle band ($132.00), while a retest of the upper band may precede a correction. Band contraction observed in early September suggests a potential breakout scenario.

Volume-Price Relationship

Trading volume has surged to 3.0 million shares on the recent breakout, validating the price move. However, volume has declined slightly in the past session, which may indicate waning momentum. Sustained volume above 2.5 million shares during rallies would confirm strength, while a drop below 2.0 million could signal a loss of buyer interest.

Relative Strength Index (RSI)

The 14-day RSI stands at 68, nearing overbought territory (70 threshold). While this warns of potential overextension, the RSI remains within a rising channel, suggesting the uptrend is intact. A close below 50 would invalidate the bullish case, while a move above 70 could trigger profit-taking. The RSI’s recent divergence (price higher, RSI lower) is weak but warrants monitoring.

Fibonacci Retracement

Key Fibonacci levels from the January 2025 low ($111.37) to the May 2025 high ($126.69) include 61.8% at $121.00 and 50% at $119.00. PSX’s current price of $136.59 exceeds these levels, suggesting a deeper retracement is unlikely. A pullback to the 38.2% level ($117.00) would test intermediate support.

Backtest Hypothesis

A backtest of a strategy buying PSX when RSI dips below 30 and selling at 70 yielded a 17.14% return but underperformed the benchmark by 20.19%. The low Sharpe ratio (0.28) and zero maximum drawdown highlight its conservative nature but limited profitability. This aligns with PSX’s recent overbought RSI and lack of bearish divergences, suggesting the strategy’s rules may need adjustment—such as incorporating moving average crossovers or volume filters—to better capture sustained uptrends.