Reddit Stock Drops 4.18% Amid Bearish Technical Signals And Key Support Test

Reddit (RDDT) declined 4.18% in the most recent session, closing at 229.98 amid elevated trading volume. This analysis examines key technical dynamics across multiple frameworks to assess the stock's positioning and probable near-term trajectory.
Candlestick Theory
Recent price action shows Reddit formed a bearish engulfing pattern on September 8th as the large red candle fully consumed the prior session's gains. This occurred near the psychological $250 resistance, which has capped advances since mid-August. Support emerges at the $220–$225 zone, where multiple reversal candles formed throughout July and August. The August 26th hammer candle at $219.43 and July 18th piercing line at $148.24 established structural baselines. Failure to hold $220 would expose the more significant $200 support level, which aligns with the 200-day moving average and coincides with the April 2025 swing low.
Moving Average Theory
The 50-day moving average ($226.50) recently crossed below the 100-day MA ($217.80), triggering a bearish signal. Both remain above the rising 200-day MA ($183.60), preserving the longer-term uptrend. However, the price is now trading below all three key averages for the first time since May 2025. This compression reflects weakening momentum, with the 50/100-day "death cross" suggesting potential near-term consolidation. The 200-day MA should provide dynamic support on any sustained pullback.
MACD & KDJ Indicators
MACD shows a bearish divergence, with the September 8th price low unconfirmed by the histogram, which registered a higher low. However, both MACD lines remain below the zero line after last week’s negative crossover. The KDJ oscillator (K: 28, D: 35, J: 14) indicates oversold territory after K%D crossed below 20. While this typically signals a potential bounce, weak histogram momentum and J-line’s sharp descent suggest limited immediate upside. Divergence appears as price made lower lows in early September while K%D formed a higher low.
Bollinger Bands
Volatility expanded significantly during the August surge from $200 to $250, with bands widening to a 12% spread at the peak. Current band width has contracted to 7%, reflecting reduced volatility. Price penetration below the lower band on September 8th signals potential short-term oversold conditions. However, any rebound would need to reclaim the $236 midline to neutralize bearish pressure. The bands' flat slope after the prior uptrend indicates consolidation is likely to persist.
Volume-Price Relationship
The recent selloff occurred on above-average volume (5.95M shares vs. 30-day avg: 6.32M), confirming distribution. Notably, August rallies saw stronger accumulation volume (peak: 13.07M shares on August 20th) compared to September declines, indicating waning bullish conviction. Critical support breaks at $200–$205 in early August triggered volume spikes, underscoring this zone’s strategic importance. Volume must diminish significantly near $220 support to signal selling exhaustion.
Relative Strength Index (RSI)
RSI(14) printed 37.5, approaching oversold territory but without extreme readings (<30). The indicator has formed lower highs since mid-August while prices tested higher highs, creating notable bearish divergence. The lack of decisive oversold signals (RSI hasn’t breached 30 since May) alongside negative divergence cautions against premature long entries. A relief rally would require RSI to overcome the 45–50 resistance zone.
Fibonacci Retracement
Applying Fib levels to the rally from the May low ($95.85) to August peak ($253.14): The 38.2% retracement at $193.50 aligns with the 200-day MA and May–June consolidation zone. The 50% level ($174.50) coincides with the July breakout point. Current trading near the 23.6% retracement ($226.50) has provided initial support, matching recent closing prices. Confluence with the 50-day MA and psychological $220 support makes this a key pivot, where failure would project downside toward the more significant $193–$195 support cluster.
Confluence and Divergence
Significant confluence occurs at $220–$225, where horizontal price support, the 100-day MA, and 23.6% Fibonacci level converge. The oversold KDJ reading and Bollinger Band penetration offer counterbalancing signals for a potential bounce. However, bearish momentum dominates through the MACD crossover, RSI divergence, and volume-confirmed breakdown. Crucially, the death cross of the 50/100-day MAs and declining RSI peaks strengthen the case for near-term downside bias. A decisive break below $220 would target the $193–$200 Fibonacci/200-day MA confluence, while recovery above $237 is needed to restore neutral positioning. Traders should monitor the $220–$230 range for resolution this week.