Rocket Lab (RKLB) Rallies 11.03% in Two Days on Bullish Technical Indicators and Overbought Conditions

Rocket Lab (RKLB) has experienced a 4.12% increase in the most recent session, marking a two-day rally of 11.03%. This sharp upward movement suggests immediate bullish momentum, warranting a comprehensive technical evaluation across multiple frameworks to assess trend strength, potential reversals, and confluence points.

Candlestick Theory

The recent price action forms a bullish engulfing pattern, where the second day’s candle fully engulfs the prior bearish session. This signals a reversal from prior weakness. Key support levels can be identified at previous consolidation zones, such as the $43.50–$44.50 range (seen in mid-August), while resistance aligns with the recent high of $49.54 (August 2). A break above $49.54 could target the next psychological level at $50.00, but failure to hold $43.50 may trigger a retest of the July 2025 trough near $38.00.

Moving Average Theory

The 50-day moving average currently resides at ~$45.00, with the 200-day at ~$28.00. The price’s recent surge above the 50-day MA confirms a short-term bullish bias, while the 200-day MA remains a critical long-term support. A “golden cross” (50-day crossing above 200-day) is unlikely in the near term due to the 200-day’s lag, but the price’s distance from the 200-day suggests a sustained uptrend. Traders may monitor the 100-day MA (~$42.00) as a dynamic support; a retest below this level could invalidate the bullish case.

MACD & KDJ Indicators

The MACD histogram shows positive divergence, with the line crossing above the signal line, indicating strengthening bullish momentum. However, the stochastic oscillator (KDJ) is entering overbought territory (K-line at ~85), suggesting a potential pullback. Divergence between MACD and KDJ warns of exhaustion in the short-term rally. A close below the 20-period KDJ’s 20 level may signal a bearish reversal, though confirmation is needed on higher timeframes.

Bollinger Bands

Volatility has expanded recently, with the bands widening from a narrow contraction in late August. The price is currently near the upper band, reinforcing overbought conditions. A reversal below the middle band ($46.00–$47.00) would suggest mean reversion, while a break above the upper band could extend the rally. The bands’ width also indicates heightened risk of a sharp correction if volume fails to support the move.

Volume-Price Relationship

Trading volume has surged on the recent rally, with the past two sessions averaging ~18.8 million shares (vs. ~15.0 million in mid-August). This validates the price strength but raises questions about sustainability. A drop in volume during follow-through rallies may indicate waning conviction. Conversely, sustained volume above 15.0 million could signal institutional accumulation.

Relative Strength Index (RSI)

The 14-period RSI is approaching 70, entering overbought territory. This suggests a high probability of near-term correction, though it does not guarantee a reversal. A close below 50 would signal bearish exhaustion, while a sustained move above 70 could indicate a breakout. Caution is warranted given the RSI’s divergence with the MACD, which may hint at a false overbought signal.

Fibonacci Retracement

Applying Fibonacci levels to the recent $43.50–$49.54 range, key retracement levels at 38.2% (~$46.50), 50% (~$46.50), and 61.8% (~$45.50) align with recent support zones. A break below 61.8% could target the 78.6% level at $43.50, while a push above the 23.6% level (~$48.00) would validate the bullish case.

Backtest Hypothesis

A backtest strategy could be constructed by combining RSI and moving average signals. For instance, a long entry could be triggered when the RSI dips below 30 (oversold) and the 50-day MA crosses above the 200-day MA, while exits occur when RSI exceeds 70 or the 50-day MA crosses below the 200-day MA. Historical data from mid-August 2025 shows that such a strategy would have captured the rally from $42.00 to $49.54 but would have exited prematurely during the overbought phase. Adjusting the RSI threshold to 65 and incorporating volume filters (e.g., volume must increase by >15% on bullish signals) may improve robustness.