Reddit Stock Forms Bullish Engulfing Pattern As Support Holds At $138

Candlestick Theory
Reddit’s recent price action reveals notable candlestick patterns. The stock closed at $148.24 on July 18, 2025, forming a bullish engulfing pattern after two consecutive down days, signaling potential near-term strength. Key support resides near $138.11 (July 18 low), aligning with the June swing low of $134.14. Resistance is observed at $149.09 (July 18 high), with stronger overhead resistance at $155–$160, a zone tested repeatedly in early July and defined by the June peak of $164.55. The recovery from the $138 support level reinforces its technical significance, while failure to breach $150 sustainably may indicate persistent selling pressure.
Moving Average Theory
The 50-day moving average (approx. $146) has crossed above the 100-day MA (approx. $135), suggesting improving medium-term momentum. However, the 200-day MA (approx. $125) remains below both, reflecting residual longer-term caution. Price action recently rebounded from the 50-day MA, reinforcing it as dynamic support. A sustained break above the descending 100-day MA would strengthen the bullish case, but the 200-day MA’s slope indicates the primary trend remains consolidation within a broader recovery phase. Confluence exists near $138–$140, where the 50-day MA and recent swing lows converge.
MACD & KDJ Indicators
The MACD histogram shows diminishing bearish momentum, with the signal line nearing a bullish crossover after price rebounded from oversold territory. KDJ readings (K: 35, D: 30, J: 45) exited oversold conditions (<30) in late June and now hover near neutral. This aligns with the MACD’s tentative recovery signal. Divergence emerged in early July when lower highs in price contrasted with rising KDJ lows, foreshadowing the recent bounce. While not decisively bullish, momentum oscillators suggest selling pressure has eased, allowing room for upside if volume confirms.
Bollinger Bands
Volatility contracted sharply in late June, with the bands narrowing to a 5% width, preceding the July breakout above $155. Price currently trades near the upper band ($148–$149), indicating stretched short-term conditions. A rejection here could retest the middle band (20-day SMA near $144), while a close above $149 would signal strength. Band expansion from July 10–17 accompanied the rally attempt, but recent contraction suggests consolidation before the next directional move. Support at the lower band ($140) remains critical for the bullish structure.
Volume-Price Relationship
The July 18 advance occurred on elevated volume (6.29M shares vs. 30-day avg ~5.5M), lending credibility to the bullish engulfing pattern. Notable distribution occurred on July 2 during the $164.55 spike (volume: 11M shares), marking a resistance zone. Conversely, accumulation is evident near $134–$138 (June 20–23 and July 16–18), where high-volume bounces defended support. The absence of volume divergence during the July recovery—volume expanded on up days and contracted on pullbacks—suggests organic demand. Sustained progress above $150 requires volume exceeding 7M shares to confirm breakout validity.
Relative Strength Index (RSI)
The 14-day RSI (current: 57) rebounded from near-oversold levels (32 on July 8) but remains below overbought territory (<70). This indicates neutral momentum with room for upside. Caution is warranted as RSI failed to reach overbought levels during the early July rally to $160, reflecting weakening upward thrust. The current reading suggests neither excessive enthusiasm nor fear, aligning with Bollinger Band signals for consolidation. A decisive break above 60 would support bullish continuation, while failure to hold 50 could reignite selling pressure.
Fibonacci Retracement
Applying Fibonacci levels to the June swing low ($134.14) and July peak ($164.55) reveals key retracement zones. The 38.2% retracement at $147 acted as resistance on July 18, while the 50% level ($149.35) capped earlier rallies. The 61.8% support ($142.50) coincides with the July 17 close and the 50-day MA, creating a high-probability bounce zone. Notably, the recent recovery stalled near the 23.6% retracement ($158), reinforcing its resistance significance. Confluence exists between Fibonacci levels and moving averages, with $142–$143 serving as critical support and $149–$150 as the next resistance pivot.
Synthesis
Multiple indicators converge around the $138–$143 support zone, including the 50-day MA, Fibonacci 61.8% level, and volume-backed accumulation. The bullish engulfing candle and MACD/KDJ momentum recovery at these levels suggest a near-term foundation for upside. However, overhead resistance remains formidable near $149–$150, where Bollinger Band stretch, Fibonacci resistance, and the July distribution zone align. Divergence persists in RSI’s inability to reach overbought during July’s rally, and sustained volume below 7M shares may limit breakout potential. Probabilistically, the setup favors range-bound consolidation between $138 and $150, with a close above $150 needed to reinvigorate the bullish trend.