Pure Storage (PSTG) Sharp 4.88% Drop as Bearish Signals Intensify Near Key Support

Pure Storage (PSTG) fell 4.88% in the most recent session, closing at $66.32. This sharp decline follows a volatile period marked by significant price swings and diverging momentum signals. Below is a technical analysis across key methodologies to assess the stock’s current positioning and potential trajectory.
Candlestick Theory
Recent price action reveals bearish exhaustion patterns, including a long lower shadow on December 16 and a doji-like formation on December 15, suggesting indecision near key resistance at $70.72. Key support levels are emerging at $66.16 (December 17 low) and $68.21 (December 16 low), with the 23.6% Fibonacci retracement level (~$68.30) acting as a critical psychological barrier. A breakdown below $66.16 may trigger a retest of the year-to-date low (~$43.50), while a reversal above $71.32 (December 12 high) could signal short-term bullish momentum.
Moving Average Theory
Short-term momentum (50-day MA at ~$72.40) remains above long-term averages (100-day ~$74.10, 200-day ~$75.90), indicating a bearish crossover scenario. The price is currently trading below all three moving averages, reinforcing a downtrend. However, the 200-day MA’s steep decline from $80 to $75.90 suggests decelerating bearish pressure, potentially setting up for a consolidation phase. A sustained close above the 50-day MA could trigger a mean reversion trade, though confluence with volume and momentum indicators is critical.
MACD & KDJ Indicators
The MACD histogram has contracted into negative territory, with the line crossing below the signal line on December 16, confirming bearish momentum. The KDJ indicator shows the %K line (stochastic fast) at 20 and %D (slow) at 35, indicating oversold conditions (~28% below threshold). However, a bearish divergence exists between the KDJ lines and price action, as the %K line failed to rise despite a rebound on December 16. This suggests overbought exhaustion rather than a reversal signal.
Bollinger Bands
Volatility has expanded, with the bands widening from a 4% range to ~7% over the past two weeks. The price is currently testing the lower band (~$66.16), a potential oversold trigger. However, the 20-period Bollinger Band width contraction on December 12 preceded the 6% collapse, signaling a false breakout. A sustained close above the middle band (~$69.20) may indicate a reentry into the trading range, but this would require confirmation from volume and RSI.
Volume-Price Relationship
Volume surged on the December 16 rebound (3.26M shares) but collapsed on the subsequent 4.88% decline, suggesting weak follow-through. This incoherence between price and volume highlights distribution dynamics, with large institutional players potentially exiting at key resistance levels. Conversely, the December 4 surge (21.46M shares) during a 27% drop confirms panic selling, but recent volume profiles show a return to baseline, indicating reduced short-term selling pressure.
Relative Strength Index (RSI)
The 14-day RSI stands at 28, entering oversold territory. While this may suggest a short-term bounce, the RSI has remained below 30 for 3 consecutive days, weakening its predictive power in a strong downtrend. A bullish divergence is absent, as the RSI has not formed higher lows despite a price rebound on December 16. A break above 35 would validate short-term oversold relief, but a failure to hold above this level could extend the decline.
Fibonacci Retracement
Key retracement levels from the year-to-date high ($96.4981) to the low ($43.50) include 38.2% at $67.40 and 50% at $69.99. The current price (~$66.32) is approaching the 23.6% level (~$68.30), which may act as a pivot point. A break below 23.6% would invalidate the 38.2% support and target the 50% level as the next critical barrier.

Confluence points suggest a high probability of continued bearish bias in the near term, with Fibonacci and Bollinger Bands aligning at ~$66.16 as a key support. Divergences between KDJ and price action, however, caution against overreliance on oversold signals in a structurally bearish trend. A reversal above $71.32 (December 12 high) would require a surge in volume and a bullish MACD crossover to validate a trend reversal. Until then, the stock remains positioned for a test of multi-month lows, with risk-reversal strategies favoring short-term put options for downside protection.