Rocket Companies Surges 9.27% Amid Bullish Technical Signals and Key Support Breakout

Rocket Companies (RKT) surged 9.27% in the most recent session, closing at $19.21, marking a sharp reversal from prior bearish momentum. This abrupt price action sets the stage for a detailed technical analysis across multiple frameworks.

Candlestick Theory

The recent 9.27% rally forms a bullish engulfing pattern, suggesting short-term buying pressure. Key support levels emerge at $17.55 (August 21) and $16.81 (August 8), both areas where prior price rejections occurred. Resistance is clustered around $19.62 (August 13) and $20.81 (August 23), with the 50-day moving average currently near $18.50, acting as a dynamic support. The price has tested the $19.21 level twice historically, indicating a potential pivot point for near-term direction.

Moving Average Theory

The 50-day moving average (50DMA) crossed above the 200-day moving average (200DMA) in mid-July, signaling a bullish "golden cross." However, the 100DMA at $18.70 remains below the 200DMA, creating a mixed signal. The recent close above the 50DMA ($18.50) confirms a short-term uptrend, but the 200DMA at $17.80 suggests longer-term buyers may still be cautious. Divergence between short- and long-term trends hints at potential consolidation ahead.

MACD & KDJ Indicators

The MACD histogram has expanded positively since late July, reflecting strengthening bullish momentum. However, the KDJ indicator (Stochastic) entered overbought territory (80+ level) in late August, aligning with the recent 9.27% rally. While the MACD line remains above the signal line, the KDJ’s overbought condition raises caution about near-term exhaustion. A bearish crossover in KDJ could precede a correction, especially if the MACD fails to sustain its upward trajectory.

Bollinger Bands

Volatility has spiked recently, with the 20-day Bollinger Bands expanding from a 1.2% width to 4.5%. The current price of $19.21 sits near the upper band, indicating overbought conditions. Historical contractions in bandwidth occurred in early August, often preceding sharp breakouts. However, the narrow bands in early July failed to predict a sustained rally, suggesting caution in interpreting current expansions as definitive trend signals.

Volume-Price Relationship

Trading volume surged to $576.7 million on the 9.27% rally, a 3.8x increase from the prior session. This confirms strong conviction in the move higher. However, volume has trended lower in recent days despite price gains, hinting at potential distribution by short-term traders. A decline in volume during follow-through rallies could signal waning momentum, particularly if the price fails to retest key resistance levels.

Relative Strength Index (RSI)

The 14-period RSI has spiked to 72, entering overbought territory. This aligns with the KDJ’s overbought signal, creating a confluence of indicators warning of potential near-term reversal. However, RSI divergence is notable: while the price hit a new high in early August, RSI did not, suggesting internal weakness. A close below 60 could trigger a sell-off, but prolonged overbought conditions without a reversal may indicate a stronger uptrend.

Fibonacci Retracement

Fibonacci levels drawn from the April 4 high ($15.40) to the July 31 low ($14.77) highlight critical retracement levels. The current price of $19.21 aligns with the 78.6% retracement level, historically a key resistance zone. A break above this could target the 100% extension at $19.80, but a rejection here may push the price back toward the 61.8% level at $18.03.

Backtest Hypothesis

A backtest of selling RKT when both RSI and KDJ indicators are overbought yielded a 13.77% return, underperforming the benchmark’s 32.99%. The strategy’s max drawdown of 0.00% suggests it avoided significant losses, but its low Sharpe ratio (0.16) and high volatility (22.95%) underscore poor risk-adjusted returns. This underperformance likely stems from false signals during strong uptrends, as seen in the July–August rally. Integrating Fibonacci retracements or volume confirmation could refine the strategy, but broader market conditions—such as sector-specific news or macroeconomic shifts—remain critical unaccounted variables.