Prudential Financial Plunges 5.11% in Two Days as Bearish Engulfing and Oversold RSI Signal Extended Downtrend

Candlestick Theory
Prudential Financial (PRU) has experienced a sharp bearish reversal, with a 4.07% decline in the most recent session and a 5.11% drop over two days. The recent candlestick pattern suggests a potential breakdown, characterized by a bearish engulfing formation as the price closes below prior support levels. Key support zones are emerging around the $111.69 level (previous close) and the $110.00 psychological barrier. Resistance levels are now at $116.43 (January 15 high) and $118.08 (January 9 high). The price action indicates a high probability of further downside if the $111.69 level is breached, as the bearish momentum appears to have gained traction.

Moving Average Theory
The 50-day moving average (estimated near $115.00) and 200-day moving average (estimated near $108.00) suggest a bearish trend, with the price currently below both indicators. The 100-day moving average (estimated near $113.00) further reinforces this downtrend. The death cross formation—where the 50-day MA crosses below the 200-day MA—has likely occurred, signaling a bearish bias. Short-term traders may note the 20-day MA (estimated near $113.00) as a potential near-term resistance if the price attempts to rebound. The confluence of multiple moving averages below the current price suggests a continuation of the bearish trajectory.

MACD & KDJ Indicators

The MACD histogram has turned negative and is widening, indicating strengthening bearish momentum. The MACD line crossing below the signal line confirms a bearish crossover. The KDJ (Stochastic) oscillator shows the K line (fast stochastic) at 15 and the D line (slow stochastic) at 20, placing the stock in oversold territory. However, the divergence between the K and D lines (K < D) suggests that the oversold condition may persist, as the bearish trend has not yet shown signs of exhaustion. A potential reversal is unlikely unless the K line crosses above the D line while remaining in oversold levels.

Bollinger Bands

Bollinger Bands have widened significantly, reflecting increased volatility following the recent selloff. The price is currently near the lower band, reinforcing the oversold condition. A break below the lower band could trigger further downside, potentially targeting the $107.00 level. Conversely, a rebound toward the middle band (estimated at $115.00) would require a reversal in momentum, which is less probable given the current bearish alignment of other indicators.

Volume-Price Relationship

Trading volume has surged during the recent decline, validating the bearish price action. The elevated volume suggests strong selling pressure and increased participation from short-term traders. However, if volume begins to wane during further declines, it may indicate waning bearish conviction and a potential short-term bottom. For now, the volume pattern supports the continuation of the downtrend.

Relative Strength Index (RSI)

The RSI is in oversold territory (estimated at 25), but caution is warranted as the indicator often lingers in oversold conditions during strong downtrends. A rebound above the 30 threshold may signal a temporary pause, though a sustained reversal is unlikely without a divergence between price and RSI. The current RSI reading underscores the high probability of further consolidation or a test of key support levels.

Fibonacci Retracement

Fibonacci retracement levels drawn from the recent high ($119.00) to low ($111.615) highlight critical support zones. The 61.8% retracement level ($114.00) has already been breached, and the 78.6% level ($112.00) is now the immediate target. A break below $112.00 may trigger a retest of the 88.6% level ($110.00). The alignment of Fibonacci levels with key moving averages and Bollinger Bands creates a high-probability scenario for continued bearish movement.

Convergence and Divergence

The bearish signal is strongly reinforced by the confluence of moving averages below the price, bearish MACD, and oversold RSI. However, the divergence between the KDJ indicator and the price action (no bullish crossover despite oversold conditions) suggests that the downtrend may persist longer than typical. Traders should monitor the 50-day MA for potential re-entry opportunities if a reversal occurs, but the current setup favors caution.