Rocket Companies (RKT) Surges 7.39% as Technical Indicators Signal Strong Bullish Momentum, 3-Day Rally Reaches 16.72%

Rocket Companies (RKT) has surged 7.39% in the most recent session, extending its three-day rally by 16.72%. This sharp upward momentum, coupled with elevated trading volumes (notably 32.8 million shares on the latest session), suggests strong near-term bullish sentiment. The stock’s price action and technical indicators now warrant a detailed multi-faceted analysis to assess the sustainability of this rally and potential reversal risks.

Candlestick Theory

The recent three-day upmove has formed a robust bullish continuation pattern, with each session’s close near the high of the range. Key support levels are emerging at $17.5 (a prior consolidation zone) and $16.8 (a psychological round number), while resistance is forming at $18.45–$18.5 (a recent overhead supply cluster). A notable candlestick signal is the "bullish engulfing" pattern observed on August 13, 2025, where the body of the candle fully encapsulates the previous session’s bearish candle, reinforcing the short-term momentum. However, a breakdown below $17.5 could trigger a retest of the $14.7–$15.2 range (identified as a prior swing low), which could act as a critical psychological floor.

Moving Average Theory

The 50-day moving average (approximately $15.8–$16.2) is currently well below the 200-day MA ($17.5–$17.8), forming a positive "golden cross" divergence. The stock’s current price ($19.62) is trading above both the 50-day and 200-day MAs, indicating a bullish medium-term trend. However, the 100-day MA ($16.9–$17.3) is converging upward, which may create a temporary friction zone if the price stalls near $18.4–$18.5. A sustained break above $19.665 (the August 13 high) could signal a shift to a stronger uptrend, while a pullback below the 50-day MA would raise concerns about near-term momentum.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past three sessions, confirming the accelerating bullish momentum. The KDJ (stochastic oscillator) has entered overbought territory (K=80, D=75), suggesting exhaustion of the rally. While this typically signals a potential pullback, the absence of bearish divergence between price and the KDJ (both are trending higher) reduces immediate reversal risk. A close below the K=50 level would indicate weakening momentum, but the current alignment of MACD and KDJ supports the continuation of the short-term trend.

Bollinger Bands

The recent price surge has pushed RKT to the upper Bollinger Band, indicating heightened volatility. The 20-period band width has widened significantly, a classic precursor to a potential contraction and subsequent breakout. If the price consolidates within the bands and the band width narrows, a sharp directional move could follow. The middle band (currently around $18.1–$18.3) serves as a dynamic support/resistance level; a break above it could extend the rally, while a drop below $17.3 (the lower band) would suggest a reentry into a trading range.

Volume-Price Relationship

Trading volume has spiked dramatically during the three-day rally, with the latest session’s $628.8 million in volume surpassing the 50-day average by 40%. This confirms strong institutional participation and validates the price surge as a supply-demand imbalance rather than retail-driven hype. However, a drop in volume during subsequent pullbacks could indicate waning conviction. Divergence between price and volume (e.g., lower highs on diminishing volume) would be a red flag for a potential reversal.

Relative Strength Index (RSI)

The 14-day RSI has surged to 72–74, entering overbought territory. While this suggests a potential short-term correction, the RSI’s lack of bearish divergence (price highs and RSI highs aligning) implies the uptrend may persist. A drop below 50 would signal a shift in momentum, but the current RSI trajectory aligns with the bullish engulfing candlestick pattern. Traders should monitor for a "failure swing" (a decline below 65–68) as a potential trigger for a pullback.

Fibonacci Retracement

Drawing retracement levels from the recent swing low ($14.77 on July 31) to the swing high ($19.665 on August 13) reveals key levels: 50% at $17.2, 61.8% at $16.7, and 78.6% at $16.2. The current price is near the 23.6% retracement level ($18.7), suggesting a potential consolidation zone. A breakdown below $17.2 would validate a deeper correction to the 61.8% level ($16.7), while a sustained close above $19.665 could target the 127.2% extension ($21.2).

Backtest Hypothesis

The backtest of RKT’s RSI overbought strategy from 2022 to 2025 reveals a nuanced performance profile. While the 3-day win rate (51.11%) suggests short-term profitability, the declining returns beyond 10 days (44.44%) highlight the strategy’s limited durability in extended trends. The maximum 52-day return of 2.81% aligns with the current overbought condition, but the average 30-day return of 0.11% underscores the need for tight risk management. This data implies that while overbought RSI levels can be exploited for quick profits, they are less reliable as standalone signals for longer-term positions. Integrating this with the current analysis, traders might consider using RSI overbought as an entry trigger for short-term trades but pair it with Fibonacci retracement levels or Bollinger Band breakouts to filter higher-probability setups.