Reddit Stock Rises 3.4% as Golden Cross and Bullish Engulfing Signal Uptrend

Candlestick Theory

Reddit’s recent price action shows a bullish trend with three consecutive up sessions, including a 3.40% gain in the latest session. Key resistance appears near $240, where the stock closed on September 5, forming a potential psychological barrier. Support levels are evident at $220–$225, where the price has previously found buying interest after declines. A bullish engulfing pattern emerged on September 3, confirming a reversal from a prior downtrend. However, bearish divergence in the KDJ indicator on August 28 suggests caution, as momentum failed to confirm higher highs.

Moving Average Theory

The 50-day moving average (approximately $200–$210) has crossed above the 200-day MA, forming a golden cross, while the 100-day MA lags behind. This suggests a medium-term bullish bias. Short-term momentum is reinforced by the 50-day MA aligning with recent price highs. However, the 200-day MA remains a critical threshold; a break below $190–$195 could invalidate the uptrend.

MACD & KDJ Indicators

The MACD histogram has expanded positively since late August, with the MACD line crossing above the signal line, confirming bullish momentum. The KDJ oscillator, however, shows overbought conditions (K > 80) in early September, suggesting a potential pullback. Divergence between KDJ and price is observed in late August, where prices rose while momentum waned, hinting at a possible correction.

Bollinger Bands

Volatility has expanded recently, with the bands widening as the stock approached the upper band ($240–$245). This contraction-expansion pattern indicates heightened volatility, often preceding a breakout or breakdown. The price remains above the 20-day SMA, reinforcing the bullish bias. A test of the lower band ($210–$215) could provide a buying opportunity if the trend holds.

Volume-Price Relationship

Trading volume spiked on September 5 and 4, confirming the recent gains. However, volume has since declined, which may signal weakening conviction. The surge in volume during the August 28 rally (6.84% gain) was followed by a sharp reversal, suggesting caution. Sustained volume above 5 million shares per session is critical to validate the uptrend.

Relative Strength Index (RSI)

The RSI reached overbought territory (>70) in late August and early September, but the price continued to rise, indicating strong momentum. A bearish signal would require a close below 50, which has not occurred yet. Divergence between RSI and price is weak, as both remain aligned.

Fibonacci Retracement

Key Fibonacci levels are established between the 52-week high ($253.14 on August 18) and low ($104.9 on April 2). The current price (~$240) is near the 61.8% retracement level, acting as a dynamic resistance. A break above this level could target $253–$260, while a drop below $217.31 (38.2% level) would challenge the bullish case.

Backtest Hypothesis

A backtest strategy using the golden cross (50-day MA > 200-day MA) combined with RSI below 30 as a buy signal and the death cross (50-day MA < 200-day MA) with RSI above 70 as a sell signal could be evaluated. Historical data from Reddit’s 2024–2025 performance shows the golden cross occurred in late August, aligning with the recent rally. However, RSI has remained above 50, limiting the strategy’s applicability. Integrating volume filters (e.g., confirming volume spikes) could enhance the setup’s reliability, particularly for entries near key Fibonacci levels.