Sony Group Shares Rally 3.55% Driven by Bullish Engulfing Pattern and Surging Volume

Sony Group closed the most recent session with a 3.55% increase to ¥28.61, reflecting a bullish reversal candlestick pattern. This move, coupled with elevated trading volume (¥128.3 million), suggests strong short-term buying pressure. Key support levels to monitor include ¥27.55 (August 21 low) and ¥24.92 (July 31 low), while resistance is likely to test ¥28.69 (August 22 high) and ¥29.16 (August 15 high).

Candlestick Theory

The recent price action forms a "Bullish Engulfing" pattern, where the August 22 body (¥28.28–¥28.69) engulfs the preceding bearish candle. This pattern, combined with volume expansion, suggests a potential reversal from a consolidation phase. Key Fibonacci retracement levels at 61.8% (¥26.50) and 78.6% (¥27.80) could act as dynamic support/resistance during pullbacks or extensions.

Moving Average Theory

The 50-day MA (~¥26.80) and 100-day MA (~¥25.40) are both trending upward, confirming a medium-term bullish bias. However, the 200-day MA (~¥24.20) remains below the current price, indicating a broader uptrend but with potential for consolidation. A break above ¥29.16 (August 15 high) could trigger a retest of the 200-day MA as a psychological barrier.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the line crossing above the signal line on August 22, forming a golden cross. This aligns with the KDJ indicator’s %K line (stochastic momentum) crossing above %D, suggesting short-term bullish momentum. However, the RSI (see below) at overbought levels may limit immediate follow-through. Divergence between the MACD and price action (e.g., lower highs in MACD despite higher price peaks) could signal weakening momentum.

Bollinger Bands

Price is currently near the upper band of the Bollinger Bands (~¥28.69), indicating overbought conditions. The bands have been expanding since mid-August, reflecting heightened volatility. A pullback to the mid-band (~¥27.50) could provide a high-probability entry for continuation trades, assuming volume remains above average.

Volume-Price Relationship

The August 22 rally saw a 3.55% price gain with volume surging to ¥4.49 million shares, a 20% increase from the 50-day average. This validates the move as a "volume-confirmed breakout." However, if subsequent rallies fail to maintain above-average volume, it may indicate waning conviction.

Relative Strength Index (RSI)

The 14-period RSI is at ~75, signaling overbought territory. While this is not an immediate sell signal (RSI can remain overbought during strong trends), a close below 60 would suggest a potential pullback. A bearish divergence (e.g., RSI peaking below prior highs while price makes new highs) would increase the probability of a correction.

Fibonacci Retracement

Applying Fibonacci levels from the May–August base (¥24.5–¥28.61), the 61.8% retracement at ¥26.50 and 78.6% at ¥27.80 are critical. A break above ¥29.16 (100% level) would confirm a new uptrend, while a failure to hold ¥26.50 could invalidate the bullish case.

Backtest Hypothesis

The strategy of buying Sony Group on MACD/KDJ golden crosses and selling on RSI overbought conditions or divergence yielded poor performance (CAGR -0.75%, total return -2.55%). This underperformance likely stems from the stock’s recent volatility and RSI’s frequent overbought readings in a trending environment. A revised approach might incorporate Fibonacci retracement levels and volume confirmation to filter false signals. For example, entering long at 61.8% retracement (~¥26.50) with a stop below ¥24.92 (July 31 low) could improve risk/reward, as the backtest’s maximum drawdown of 0.00% suggests limited downside risk.