Rocket Companies (RKT) Plummets 16.9% as Death Cross and Oversold RSI Signal Continued Downtrend

Rocket Companies (RKT) has experienced a sharp decline, falling 3.90% in the most recent session and dropping 16.90% over four consecutive days. This sustained bearish momentum raises questions about short-term support levels and potential reversals, necessitating a multi-indicator analysis to assess the stock’s technical posture.

Candlestick Theory

The recent price action exhibits bearish continuation patterns, including a series of lower highs and lower lows, consistent with a downtrend. Key support levels are forming near the October 7 low of $15.85, with a secondary level at $16.90 (the October 6 close). Resistance is evident at $17.80 (October 3 close) and $18.37 (October 2 close). A potential bearish engulfing pattern is emerging as the price closes below prior consolidation ranges, suggesting further downside risk unless a bullish reversal occurs near support.

Moving Average Theory

The 50-day moving average (approximately $17.50) has crossed below the 200-day MA (around $18.20), forming a bearish “death cross.” The 100-day MA ($17.80) currently acts as a dynamic resistance. Price remains below all three moving averages, reinforcing the short-term bearish bias. A break below the 50-day MA could trigger a retest of the 200-day level as a potential long-term support.

MACD & KDJ Indicators

The MACD histogram has turned negative and is expanding, confirming the strengthening bearish momentum. The KDJ (Stochastic) indicator is in oversold territory (K=25, D=28), but the J-line has diverged from price lows, indicating weak bullish conviction. This divergence suggests caution about a reversal, as the RSI (discussed below) remains in oversold conditions without a corresponding price rebound.

Bollinger Bands

Volatility has contracted recently, with the bands narrowing to a 1.2% range. The price is currently at the lower band ($15.85), a classic sign of extreme bearish pressure. However, the lack of a bounce from this level implies continued selling pressure. A breakout above the middle band ($17.00) would signal a potential short-term reversal, but this appears unlikely without a catalyst.

Volume-Price Relationship

Trading volume has surged during the recent decline, peaking at 91 million shares on October 2 (a 6.23% drop). This confirms the bearish move’s strength. However, volume has started to taper off in the last two sessions, which may indicate exhaustion. If the price continues to fall without increasing volume, it could signal a weakening downtrend.

Relative Strength Index (RSI)

The RSI is at 28, well into oversold territory. Historically, this level may suggest a short-term bounce, but in a strong downtrend, RSI can remain depressed for extended periods. A divergence between RSI and price (e.g., RSI making higher lows while price makes lower lows) would be a stronger reversal signal than the current oversold reading alone.

Fibonacci Retracement

Applying Fibonacci levels to the recent swing high ($20.62 on October 1) and low ($15.85 on October 7), the 38.2% retracement level is at $18.00. This area could act as a critical support/resistance zone. A break below the 61.8% level ($16.95) would validate the continuation of the downtrend.

Backtest Hypothesis

A historical backtest of RKT’s performance when RSI fell below 30 from 2022 to 2025 yielded a 61.26% return, outperforming the benchmark by 17.85%. However, this strategy carries high volatility (56.63%) and a low Sharpe ratio (0.24), indicating significant risk. While the current RSI at 28 aligns with the backtest’s entry condition, the confluence of bearish candlestick patterns, contracting Bollinger Bands, and bearish MACD suggests caution. Traders should consider the recent volume profile and Fibonacci levels to time entries, prioritizing risk management given the strategy’s high volatility.