Rocket Companies Shares Plummet 17.20% on Bearish Candlestick and Moving Average Signals

Candlestick Theory

Rocket Companies (RKT) has experienced a 5-day losing streak, with a cumulative decline of 17.20%, reflecting strong bearish momentum. The price action suggests a potential breakdown below key support levels. Notable patterns include a bearish engulfing formation on October 3, where the candle closed at $17.8 after a 3.10% drop, and a dark cloud cover on October 2, with a 6.23% decline. Key support levels are emerging around $16.22 (most recent close) and $15.85 (October 7 low), while resistance is temporarily stalled near $17.10 (October 6 low). The absence of bullish reversal patterns, such as harami or morning star, reinforces the likelihood of further downside pressure in the near term.

Moving Average Theory

Short-term and long-term moving averages indicate a bearish bias. The 50-day MA (currently below $17.00) has crossed below the 200-day MA, forming a death cross, which historically signals a prolonged downtrend. The 100-day MA also remains above the 200-day MA, confirming medium-term bearish momentum. Price action has consistently traded below all three MAs, suggesting a structural bear market. A retest of the 50-day MA could trigger a bounce, but a sustained close above the 200-day MA ($18.50–$19.00 range) would be required to invalidate the bearish case.

MACD & KDJ Indicators

The MACD histogram has turned negative, with the MACD line (12,26) crossing below the signal line (9) on October 7, confirming a bearish crossover. This aligns with the death cross identified in moving averages. The KDJ (Stochastic RSI) shows oversold conditions, with the %K line at 28 and %D at 32, suggesting potential for a short-term rebound. However, divergence between the KDJ and price action—where %K fails to rise despite a pullback—raises caution. The RSI (14) is near 30, reinforcing the oversold reading, but historical data shows RSI can remain in oversold territory during strong downtrends, limiting its predictive power.

Bollinger Bands

Volatility has expanded as the price approaches the lower Bollinger Band (currently at $16.00–$16.50). The 20-period Bollinger Band width is at its widest in months, indicating heightened volatility. A break below the lower band could trigger a mean-reversion bounce, but the prevailing bearish context suggests the bounce may be short-lived. The midline of the bands ($17.50) acts as a critical psychological level; a sustained close above this would signal a potential trend reversal.

Volume-Price Relationship

Trading volume has surged during the recent decline, particularly on October 2 and October 3, with over 90 million shares traded. This volume expansion validates the bearish move, as heavy selling pressure confirms the breakdown. However, volume has started to taper off in the last two sessions, which may indicate waning bearish momentum. A surge in volume during a potential rebound would strengthen the case for a short-term reversal, while muted volume would suggest a continuation of the downtrend.

Relative Strength Index (RSI)

The RSI (14) has dipped to 29, entering oversold territory, but this does not guarantee an immediate reversal. Historical analysis of RKT shows that during prior downtrends, RSI remained in oversold conditions for extended periods. For example, in late 2024, RSI stayed below 30 for over two weeks before a sharp decline. Thus, while the oversold reading may attract short-term buyers, it should be treated as a warning rather than a definitive reversal signal.

Fibonacci Retracement

Applying Fibonacci retracement levels to the recent $19.59 high (October 1) and $16.22 low (October 8) reveals key psychological thresholds. The 38.2% retracement level is at $17.95, which aligns with the October 3 high and could act as a short-term resistance. The 61.8% level ($16.90) coincides with the October 6 low and may serve as a critical support. A break below $16.90 would target the 78.6% level ($16.40), reinforcing the bearish case.

Backtest Hypothesis

The MACD Death Cross strategy, which triggers a 10-day hold after a bearish crossover, underperformed significantly from 2022 to 2025. Backtest results show a total return of 8.31% versus the benchmark’s 53.38%, with an excess return of -45.07%. The strategy’s Sharpe Ratio of 0.07 indicates poor risk-adjusted performance, while volatility (30.37%) and a max drawdown of 0% highlight its inconsistency. The failure of this strategy aligns with RKT’s bearish technical profile, where MACD and moving average signals have repeatedly confirmed downtrends. However, the oversold RSI and Bollinger Band contraction suggest limited utility in relying solely on momentum indicators for short-term trades.