Reddit's RDDT shares surge 4.02% in two-day rally on bullish technical indicators, cumulative gain hits 5.48%

Reddit (RDDT) has surged 4.02% in the most recent session, extending its winning streak to two consecutive days with a cumulative gain of 5.48%. The price action reflects a bullish momentum, with the recent candle forming a long-bodied bullish pattern near key resistance levels. The most immediate support appears to be around $213.15, while resistance is likely near $239.37, based on prior price interactions. A breakdown below $213.15 could trigger a retest of earlier troughs, while a sustained close above $239.37 may validate a broader uptrend.

Candlestick Theory

The recent bullish candlestick pattern suggests strong buying pressure, particularly as the price has closed near the upper end of its range in the last two sessions. However, the formation of a potential "higher high" without a corresponding increase in volume (discussed later) may hint at diminishing momentum. Key support levels to monitor include $213.15 and $208.24, while resistance is clustered around $239.37 and $241.76. A breakdown below $213.15 could lead to a retest of the $205.37–$208.24 range, which has historically acted as a consolidation zone.

Moving Average Theory

Short-term moving averages (50-day and 100-day) are currently above the 200-day MA, indicating a bullish bias in the intermediate term. The 50-day MA is positioned near $220.06, while the 200-day MA sits at approximately $188.64, suggesting a multi-month upward drift. However, the 100-day MA (~$211.10) is approaching convergence with the 50-day MA, which could signal a potential flattening of the trend if the 50-day MA slows. Traders should watch for a cross below the 50-day MA as a bearish signal, though the current alignment remains supportive of a continuation.

MACD & KDJ Indicators

The MACD histogram has shown a narrowing divergence, with the line crossing above the signal line in recent days, reinforcing the bullish case. However, the RSI (KDJ) is nearing overbought territory (~68), though it has not yet breached the 70 threshold. This suggests caution, as a pullback could occur if buyers exhaust their momentum. The KDJ indicator’s stochastic lines (K at 82, D at 74) also suggest a potential overbought condition, with a bearish crossover likely if the K line dips below D in the coming sessions.

Bollinger Bands

Volatility has expanded in recent sessions, with the upper Bollinger Band currently at ~$234.38. The price is trading near the upper band, which historically has acted as a dynamic resistance level. A break above this could trigger a continuation of the uptrend, while a retrace to the middle band (~$225.08) may offer a buying opportunity. Conversely, a drop below the lower band (~$219.43) could indicate a reversal, particularly if accompanied by a spike in volume.

Volume-Price Relationship

Volume has surged in the most recent session, with 4.27 million shares traded, supporting the validity of the price increase. However, the volume spike is slightly lower than the previous day’s 8.43 million shares, suggesting a potential exhaustion phase. A sustained increase in volume would be necessary to confirm the continuation of the bullish trend, while a decline could signal weakening conviction among buyers.

Relative Strength Index (RSI)

The 14-day RSI is approaching overbought levels (~68), with no immediate signs of a bearish reversal. Historical data shows that the RSI has frequently traded between 50 and 70 in recent months, indicating a generally bullish bias. A close above 70 would be a warning sign, though it is not a definitive sell signal without confirmation from other indicators. The RSI’s troughs have been forming higher lows, suggesting a potential bullish divergence if the price continues to rise.

Fibonacci Retracement

Key Fibonacci levels derived from the recent high ($239.37) and low ($213.15) include 23.6% at $232.11, 38.2% at $230.50, and 50% at $226.26. The current price is near the 23.6% retracement level, which may act as a support zone. A breakdown below this level could see the price test the 38.2% level next. Conversely, a breakout above $239.37 would extend the Fibonacci sequence to higher targets.

Backtest Hypothesis

A potential backtesting strategy could involve entering long positions when the price crosses above the 50-day MA, the MACD line crosses above the signal line, and the RSI is below 50. Exit criteria might include a close below the 20-day MA or a bearish divergence in the RSI. Given the recent confluence of bullish indicators (moving averages, MACD, and volume), this strategy would likely show a high win rate in the current environment. However, the near-overbought RSI and narrowing Bollinger Bands suggest incorporating a trailing stop-loss near the 23.6% Fibonacci level to manage risk.