Synopsys Surges 12.86% on MACD Golden Cross and Bullish Moving Averages Amid Overbought RSI Caution

Synopsys (SNPS) has surged 12.86% in the latest session, closing at 480.11, following a volatile trading pattern marked by sharp corrections and rebounds. This recent rally builds on a broader trend of alternating bullish and bearish momentum, as evidenced by the candlestick structure. Key support levels appear to congregate around the 417–425 range, where the stock found buying interest during prior pullbacks, while resistance is clustered near the recent high of 483.24. A bullish "engulfing" pattern on the 2025-09-18 session suggests short-term momentum may persist, though divergences in volume during this rally warrant caution about overextending positions.

Moving Average Theory

The 50-day and 100-day moving averages (calculated from the provided data) are trending above the 200-day line, indicating a medium-term bullish bias. However, the 200-day MA acts as a critical support level, currently around 450–460, which the stock has tested multiple times. The price’s recent retest of the 50-day MA at approximately 475–480 suggests confluence with the bullish candlestick signals. A break below the 200-day MA would signal a potential shift in trend, while a sustained close above the 50-day MA could validate the continuation of the uptrend.

MACD & KDJ Indicators

The MACD histogram has transitioned from negative to positive territory, with the MACD line crossing above the signal line—a "golden cross"—indicating strengthening momentum. The KDJ oscillator (%K and %D lines) shows %K rising above %D, reinforcing the bullish case. However, the RSI (discussed below) has reached overbought territory (>70), suggesting caution. Divergences between the MACD and KDJ on the 2025-09-17–18 sessions hint at potential exhaustion in the rally, particularly if volume fails to confirm the price action.

Bollinger Bands

The stock’s price is currently near the upper Bollinger Band, reflecting heightened volatility. The bands have widened significantly following the recent surge, a classic sign of a breakout phase. If the price consolidates within the bands and the 20-day volatility narrows, it may signal a period of consolidation before the next directional move. A sustained close above the upper band could confirm a continuation of the uptrend, while a retest of the lower band may offer a buying opportunity.

Volume-Price Relationship

Trading volume surged during the recent 12.86% rally, with the 2025-09-18 session recording 8.24 million shares traded—well above the 30-day average. This volume validates the strength of the rally but also raises concerns about a potential pullback if volume tapers off in subsequent sessions. Divergences between price highs and volume peaks (e.g., on 2025-09-11 vs. 2025-09-18) suggest that while the rally has strong conviction, it may lack broad-based participation.

Relative Strength Index (RSI)

The 14-period RSI has entered overbought territory (70+), aligning with the backtest strategy’s sell trigger. However, in strong uptrends like the current one, RSI can remain elevated for extended periods. A closing RSI below 70 with a divergence (price highs vs. RSI highs) would provide a more reliable signal of waning momentum. The recent overbought condition should be interpreted as a cautionary flag rather than an immediate sell signal, especially given the MACD and KDJ alignment.

Fibonacci Retracement

Key Fibonacci levels derived from the recent high (614.89) and low (584.005) include 38.2% (600.38), 50% (599.45), and 61.8% (598.51). The stock’s current price is well above these levels, suggesting the uptrend remains intact. A breakdown below the 61.8% retracement level could trigger a deeper pullback toward the 500–510 range, where prior support clustered.

Backtest Hypothesis

The backtest strategy of buying on a MACD golden cross and selling when RSI exceeds 70 yielded a 31.94% return but underperformed the benchmark by 16.52%. The Sharpe ratio of 0.32 and 25.68% volatility highlight its moderate risk-adjusted returns. The strategy’s premature exits—triggered by RSI overbought conditions—likely limited its potential, as the stock’s uptrend persisted beyond these thresholds. A refined approach might incorporate additional filters, such as waiting for a bearish divergence in the MACD or a breakdown below key moving averages, to avoid false signals in strong trends.