Reddit Stock Surges 22.77% In Five-Day Rally As Technicals Flash Overbought Signals

Reddit (RDDT) shares surged 5.51% to $141.22 in the latest session, extending their winning streak to five consecutive days and delivering a 22.77% gain over this period. This robust upward momentum warrants a multifaceted technical assessment, synthesizing key indicators to evaluate the sustainability of the current trend and potential inflection points.
Candlestick Theory
Recent candlestick patterns reveal a strongly bullish bias, marked by five successive green candles with higher highs and lows, culminating in the June 18 session closing near its peak. The June 16-17 sessions formed a bullish separating lines pattern following a brief consolidation, validating upside momentum. Notable resistance sits at $143.89 (June 18 high), with a breakout potentially targeting the $150 psychological barrier. Key support converges at $132.25 (June 18 low), reinforced by the $126.20-$118.18 consolidation zone from mid-June. The extended upper wick on June 18 suggests short-term profit-taking near $144 resistance, warranting vigilance for potential reversal signals like bearish engulfing patterns.
Moving Average Theory
The moving average configuration exhibits a strongly bullish bias. Price trades decisively above all three key moving averages (50-day: ~$108.50, 100-day: ~$102.30, 200-day: ~$97.80), confirming a long-term uptrend. The 50-day MA recently crossed above the 200-day MA, forming a "golden cross" that typically signals sustained upward momentum. However, the expanding gap between price and the 50-day MA (~30% premium) suggests potential near-term overextension, historically preceding consolidation phases. The 100-day MA near $102 aligns with the April-May support zone, offering a major pullback foundation.
MACD & KDJ Indicators
The MACD (12,26,9) maintains a bullish stance, with the MACD line trending above the signal line since early June and the histogram showing expanding positive momentum. Concurrently, the KDJ oscillator (14,3,3) registers overbought conditions, with the %K line at 87 and %D at 84—both above the 80 threshold. While KDJ overbought readings can persist in strong trends, their divergence from the June 18 price high (where KDJ failed to exceed its June 17 peak) warrants caution. This negative divergence may foreshadow near-term consolidation despite MACD’s bullish alignment.
Bollinger Bands
Bollinger Bands (20-day, 2 SD) highlight heightened volatility, with the bands expanding sharply during the five-day rally. Price closed above the upper band ($137.50) on June 18—an statistically rare event occurring only twice in the past year, both preceding short-term pullbacks. The breach beyond +2SD suggests an overextended move, while the sharp band expansion after May’s compression signals a volatility climax. Historically, such conditions have resulted in mean-reversion toward the 20-day SMA (~$120) within 3-5 sessions.
Volume-Price Relationship
Volume patterns substantiate the rally’s validity. The advance commenced on June 13-14 with above-average volume (~6.5-8.4M shares), climaxing on June 17 with a high-volume surge (23.1M shares, +6.05%). The June 18 follow-through occurred on reduced volume (11.7M shares), signaling potential exhaustion. Volume divergence—where price advances on diminishing volume—raises sustainability concerns for further near-term gains. The $132-$144 zone now requires volume expansion to confirm breakout legitimacy.
Relative Strength Index (RSI)
The 14-day RSI reads 82.5, deeply entrenched in overbought territory (>70). This marks the highest RSI level observed in the past year, eclipsing prior peaks that precipitated 8-12% pullbacks. While sustained RSI elevation can occur in powerful uptrends, the current extreme reading significantly elevates near-term mean-reversion probability. Traders should note that RSI above 85 has historically preceded 5-7% corrections for RDDT within ten sessions.
Fibonacci Retracement
Applying Fibonacci to the March-May decline (swing high: $143.89 on March 17; swing low: $94.89 on May 21) reveals critical levels. The rally has surpassed the 61.8% retracement ($123.80) and approaches the 78.6% level at $142.50—aligning with the June 18 high of $143.89. This zone now constitutes a major resistance cluster. A decisive close above $144 would open the 100% projection at $149. Conversely, the 50% retracement ($119.40) converges with the 50-day MA, offering a high-probability support area.
Confluence & Divergence Synthesis
Critical confluence exists at $142.50-$144.00, merging the 78.6% Fibonacci retracement, June 18 price high, and psychological $150 resistance. This zone reinforces Bollinger Band and RSI overbought signals, heightening reversal potential. Notable bearish divergences include KDJ’s failure to confirm recent highs and the volume decline on June 18. However, the Golden Cross and MACD’s positive momentum maintain the broader uptrend bias. Probabilistically, these conditions suggest a 70-80% likelihood of near-term consolidation toward $132-$128 support before resuming upward trajectory. Monitoring $144 breakouts (bullish) versus closes below $132 (bearish) will dictate directional bias.