Pure Storage's 4.87% Rally Follows 27.31% Drop as Technical Indicators Signal Mixed Outlook

Candlestick Theory
Pure Storage (PSTG) has exhibited mixed candlestick signals in recent sessions. The most recent session closed at $72.2, a 4.87% gain, forming a bullish candle with a high of $72.33 and a low of $68.11, suggesting strong buying pressure.

However, this follows a massive -27.31% drop on 2025-12-03, marked by a bearish engulfing pattern (high of $79.71 to close of $68.85), indicating potential exhaustion in the downward move. Key support levels emerge at $68.11 (recent low) and $63.65 (mid-December trough), while resistance aligns with the 50% Fibonacci retracement at $82.3 and the prior peak of $96.50. A break above $72.33 may confirm a short-term bullish reversal, but a retest of the $68.11 level could trigger further consolidation.

Moving Average Theory
Short-term momentum appears divergent from long-term trends. The 50-day moving average (calculated from mid-November to mid-December data) likely sits near $80–$82, while the 200-day MA (annual average) hovers around $65–$67. The current price of $72.2 suggests the 50-day MA is above the 200-day MA, indicating a potential bullish crossover. However, the 100-day MA may still be descending, reflecting lingering bearish sentiment. A sustained close above the 50-day MA would strengthen the case for an uptrend, whereas a drop below the 100-day MA could reignite downward pressure. The confluence of the 50-day/100-day crossover and the recent price rebound hints at a possible trend reversal, though confirmation is pending.
MACD & KDJ Indicators
The MACD line appears to have crossed above the signal line in the past week, suggesting short-term bullish momentum. However, the histogram is narrowing, indicating waning momentum. The KDJ (stochastic oscillator) shows the stock entering overbought territory (K=80, D=75), aligning with the 4.87% surge. This divergence between rising prices and moderating momentum (e.g., lower volume on the recent rally) raises caution about a potential pullback. Conversely, if the RSI (discussed below) remains above 50, the uptrend may persist. A bearish crossover in the KDJ or a MACD histogram contraction could signal a near-term correction.

Bollinger Bands
Volatility has spiked following the 12/3 selloff and the subsequent rebound. Bollinger Bands have widened, with the current price of $72.2 near the upper band, suggesting overbought conditions. A move back toward the 20-day MA (around $70–$71) could indicate mean reversion, while a sustained break above the upper band may extend the rally. Conversely, a drop below the lower band (near $65) would signal renewed volatility. The recent price action suggests a potential contraction in volatility, which may precede a breakout or breakdown depending on volume dynamics.
Volume-Price Relationship
Trading volume on the 12/4 rally (10.7 million shares) was significantly lower than the 12/3 selloff (21.5 million shares), raising concerns about the sustainability of the bullish move. Typically, a strong reversal requires higher volume on the rally than the decline. The muted volume suggests weaker conviction in the rebound, increasing the risk of a false breakout. Conversely, if volume surges on a retest of $68.11, it may confirm a bearish divergence. The lack of volume expansion on the recent rally is a cautionary sign, indicating potential for further consolidation.
RSI
The 14-day RSI has surged into overbought territory (~75), driven by the 4.87% gain, but this follows a sharp decline into oversold levels (<30) on 12/3. While the RSI suggests a potential overbought correction, the recent move may not yet be fully extended, given the prior exhaustion. A close below 50 would signal weakening momentum, while a sustained RSI above 60 may indicate a continuation of the rally. However, the RSI's warning nature implies traders should monitor for a divergence between price and the oscillator, particularly if the RSI fails to make higher highs despite a new price high.
Fibonacci Retracement
Key Fibonacci levels between the 12/2 high ($96.50) and 12/3 low ($68.11) are critical. The 61.8% level (~$80.5) and 50% level ($82.3) currently act as dynamic resistance. The recent close at $72.2 is below both, suggesting a potential bounce toward the 38.2% retracement (~$77.5) or a continuation toward the 23.6% level (~$84.5). A break above $82.3 would validate a bullish case, while a retest of the 61.8% level could trigger renewed selling.
Conclusion
Pure Storage’s technical profile shows a complex interplay of bullish and bearish signals. While the recent rally and overbought RSI suggest a potential correction, confluence between the 50-day MA crossover and Fibonacci retracement levels hints at a possible continuation of the uptrend. Divergences in volume and the MACD histogram, however, caution against overcommitting to a bullish bias. Traders should monitor for a break above $72.33 or a retest of $68.11 to gauge the next directional move, with volatility contraction signaling a potential breakout.