Rocket Companies (RKT) surges 3.23% on two-day 5.72% rally as technical indicators signal short-term bullish bias amid rising volatility

Rocket Companies (RKT) has surged 3.23% in the most recent session, extending its two-day winning streak with a cumulative gain of 5.72%. The stock’s price action and technical indicators suggest a short-term bullish bias, though volatility and divergences in momentum metrics warrant caution. Below is a detailed analysis using the requested frameworks.

Candlestick Theory

The recent price action features a two-day bullish pattern characterized by a "Higher High, Higher Low" structure. The 2025-09-26 session closed at $19.51 after a 2.41% gain, followed by a 3.23% rally to $20.14 on 2025-09-29. This sequence suggests a potential breakout from a consolidation phase. Key support levels include the 2025-09-25 low of $19.05 and the 2025-09-24 low of $18.82, while resistance is likely to be tested at the recent high of $20.14 and the 2025-09-23 peak of $20.38. A failure to hold above $19.05 could trigger a retest of earlier troughs, while a close above $20.38 may confirm a short-term uptrend.

Moving Average Theory

The 50-day moving average (calculated from the last 50 days of closing prices) appears to be trending upward, currently positioned above the 200-day MA, signaling a bullish short-term bias. The 100-day MA, however, lags behind the 50-day, indicating intermediate-term momentum is mixed. If the price sustains above the 50-day MA, it may reinforce the likelihood of a continuation pattern. Conversely, a pullback below the 200-day MA could negate the bullish setup, particularly if the 50-day MA crosses below the 200-day (a "death cross").

MACD & KDJ Indicators

The MACD line has crossed above the signal line, suggesting short-term momentum is accelerating. A bullish crossover in the MACD histogram aligns with the recent price surge. The KDJ (Stochastic Oscillator) shows the stock is approaching overbought territory, with the %K line near 75 and %D approaching 65, indicating a potential pullback. Divergence between the KDJ and price action (e.g., lower highs in %K despite higher price highs) may signal weakening momentum. The RSI, currently near 65, is not yet in overbought territory but suggests caution if it crosses 70 in the near term.

Bollinger Bands

The recent price surge has pushed RKT to the upper Bollinger Band, reflecting heightened volatility. The bands have expanded following the 5.72% two-day gain, indicating increased market participation. A reversion toward the 20-day moving average (the centerline of the bands) could provide a buying opportunity if volume confirms the move. However, if the price breaks above the upper band without a corresponding increase in volume, it may signal an overextended rally.

Volume-Price Relationship

Trading volume has spiked in the last two sessions, with 21.4 million shares traded on 2025-09-29 and 21.8 million on 2025-09-26. This volume surge aligns with the price gains, validating the bullish move. However, a divergence in volume (e.g., declining volume during a rally) could indicate waning buying interest. The high volume on 2025-09-29 suggests strong conviction, but traders should monitor whether volume sustains during further upward moves.

Relative Strength Index (RSI)

The RSI has climbed to 63 over the past 14 days, reflecting strong momentum. While not yet in overbought territory, the indicator is approaching 70, which could act as a resistance level. A close above 70 would signal overbought conditions, increasing the risk of a short-term correction. Conversely, a drop below 50 may indicate weakening momentum, particularly if accompanied by a breakdown in key support levels.

Fibonacci Retracement

Applying Fibonacci levels to the 2025-09-22 low ($19.82) and the 2025-09-29 high ($20.14) reveals critical retracement levels. The 38.2% retracement at $20.00 and the 61.8% level at $19.95 are likely to act as dynamic support/resistance. A breakdown below $19.95 may trigger a retest of the 2025-09-25 low ($19.05), while a close above $20.14 could target the 2025-09-11 high of $21.11.

Backtest Hypothesis

A backtest of the strategy described—buying RKT when a Hammer candlestick pattern appears at the $19.05 support level and holding for 10 days—reveals underperformance relative to the benchmark. From 2022 to 2025, the strategy yielded a -2.64% return, compared to the benchmark’s 17.64%. The negative Sharpe ratio (-0.17) and high volatility (14.26%) underscore poor risk-adjusted returns. Confluence between the Hammer pattern and other indicators (e.g., high volume, bullish MACD) did not sufficiently sustain the move, while divergences in RSI and KDJ signaled weak momentum. The strategy’s failure to capitalize on the 2025-09-29 rally highlights the need for additional filters, such as volume confirmation or tighter stop-loss levels.