Samsara (IOT) Surges 17.44% on Bullish Engulfing Pattern, Golden Cross and 23.98M Volume Spike

Samsara (IOT) has surged 17.44% in the most recent session, extending a three-day rally with a cumulative gain of 18.60%. This sharp upward move, coupled with elevated trading volume (23.98 million shares), suggests strong institutional or retail buying pressure. The price has broken above a key psychological barrier at $42.09, with the 200-day moving average currently positioned at $38.15, indicating a potential shift in long-term trend dynamics. Recent price action shows a bullish engulfing pattern, where the September 5 candlestick completely covers the previous day’s range, signaling a potential continuation of the uptrend.

Candlestick Theory

The three-day rally forms a classic bullish continuation pattern, with the September 5 candlestick exhibiting a long upper shadow (from $38.39 to $42.87) and a decisive close near the high. This suggests strong conviction among buyers, particularly after a prior consolidation phase between $34.69 and $36.49. Key support levels are identified at $35.84 (September 4 close) and $33.60 (September 2 close), while resistance is clustered around $42.87 (September 5 high) and $45.00 (a former level of congestion in early June). A break above $45.00 could trigger a retest of the June 10 high at $45.81, but a failure to hold above $35.84 may invite short-term profit-taking.

Moving Average Theory

The 50-day moving average (currently around $39.50) has crossed above the 100-day line ($38.70), forming a bullish "golden cross." This aligns with the recent price surge, suggesting short-term momentum is overpowering medium-term trends. The 200-day MA remains at $38.15, indicating a potential breakout from a long-term trading range. If the stock sustains above $40.00, the 200-day MA could act as a dynamic support, reinforcing the bullish bias. However, a pullback below the 50-day MA would invalidate the immediate trend and target the 100-day line as a critical reentry point.

MACD & KDJ Indicators

The MACD histogram has turned positive with a widening gap between the MACD line and signal line, confirming accelerating bullish momentum. The KDJ stochastic oscillator shows %K at 85 and %D at 78, entering overbought territory but not yet diverging from price. This suggests the uptrend remains intact, though a reversal could occur if %K drops below %D while the price tests $38.00. The RSI, at 72, is approaching overbought levels, but the divergence between the RSI and price (a 17.44% gain in a single session) implies the trend may persist beyond typical overbought thresholds.

Bollinger Bands

The recent price surge has pushed Samsara to the upper Bollinger Band, with volatility at its highest level in the dataset (20% width between the bands). This contraction-expansion pattern suggests a potential exhaustion of the current move, with a possible pullback toward the 20-day moving average ($39.20) as the next target. If the price closes below the lower band ($38.39), it may trigger a mean reversion trade, but the current context favors a continuation above the upper band due to strong volume and moving average alignment.

Volume-Price Relationship

The September 5 session saw a 17.44% price gain on 23.98 million shares, a 300% increase from the September 4 volume of 9.99 million. This surge in volume validates the strength of the move, as it exceeds the average daily volume of 15 million shares over the past 30 days. However, the declining volume on subsequent days (e.g., 6.09 million on September 4) may indicate diminishing momentum. A sustained rally would require a new surge in volume to confirm institutional participation, while a sharp drop in volume during pullbacks could signal exhaustion.

Relative Strength Index (RSI)

The 14-day RSI stands at 72, nearing overbought territory. While this typically warns of potential short-term corrections, the RSI has not yet formed a bearish divergence (price highs above previous highs without RSI confirmation). A close below 60 would signal weakening momentum, but given the stock’s recent performance, a retest of the 70 threshold is more likely before any meaningful reversal. Traders should monitor the RSI for a potential bearish crossover if the price fails to break above $45.00.

Fibonacci Retracement

Drawing retracement levels from the June 10 high ($45.81) to the July 18 low ($37.88), key levels include 23.6% at $42.80 and 38.2% at $41.10. The current price near $42.09 aligns with the 23.6% retracement level, acting as a potential resistance-turned-support. A breakout above this level would target the 50% retracement at $39.85, but a failure to hold here may invite a retest of the 61.8% level at $38.40, where the 200-day MA coincides.

Backtest Hypothesis

A hypothetical strategy could leverage the confluence of the 50-day MA crossover and RSI entry/exit signals. For instance, entering long positions when the 50-day MA crosses above the 100-day MA (as seen on September 5) and exiting when RSI exceeds 75. Backtesting this approach over the past year would require filtering for volume spikes (e.g., >15 million shares) to confirm strength. Divergences between MACD and price (e.g., a narrowing histogram during an uptrend) could act as early warning signals. Given Samsara’s current positioning, this strategy would have captured the September rally but may have exited prematurely due to the RSI nearing 72. Adjustments for Fibonacci levels and Bollinger Band expansions could refine entry timing, particularly in volatile environments.