Trip.com's 3.42% Surge Triggers Bullish Engulfing Pattern, 166.01% Backtest Return Confirms Uptrend Amid Key Support/Resistance Levels

Candlestick Theory

Trip.com's recent 3.42% surge on August 15th forms a bullish engulfing pattern, reversing a prior downtrend. Key support levels are identified at $60.31 (August 14 close) and $58.80 (August 8 close), while resistance aligns with the recent high of $62.37 and a prior peak at $64.43 (July 25). The price action suggests a potential breakout above $62.37, with a failure to hold above $60.31 risking a retest of $58.80.

Moving Average Theory

The 50-day moving average (currently ~$61.50) sits above the 200-day MA (~$60.50), confirming an uptrend. The 200-day MA may act as dynamic support if the price dips toward it, while the 50-day MA could reinforce bullish momentum if the price remains above it. A crossover of the 50-day MA below the 200-day MA would signal a bearish shift, though current data suggests this is unlikely in the short term.

MACD & KDJ Indicators

The MACD histogram has shown a recent positive divergence, with a golden cross occurring in early August, suggesting a potential continuation of the uptrend. The KDJ stochastic oscillator, however, indicates overbought conditions (K-line above 80), raising the possibility of a near-term pullback. While the MACD supports bullish bias, the overbought RSI (discussed later) and KDJ divergence may signal caution, highlighting a potential short-term consolidation phase.

Bollinger Bands

Volatility has expanded recently, with the price testing the upper band ($62.37) on August 15. The bands’ width suggests heightened volatility, and a breakout above the upper band could trigger further gains. Conversely, a breakdown below the middle band (~$61.00) would indicate weakening momentum. The 20-period Bollinger Band squeeze observed in mid-August has since resolved, aligning with the recent price surge.

Volume-Price Relationship

Trading volume spiked on the August 15 rally (~4.1 million shares), validating the price increase. However, volume has declined in subsequent sessions, suggesting reduced conviction. A sustained increase in volume during an upward move would strengthen the bullish case, while a lack of follow-through volume could signal exhaustion.

Relative Strength Index (RSI)

The 14-period RSI stands at ~68, nearing overbought territory (>70). While this may indicate a potential pullback, the RSI has remained elevated during the recent uptrend, suggesting strong buying pressure. A close above 70 would confirm overbought conditions, but a failure to break 70 may indicate continued bullish momentum.

Fibonacci Retracement

Key Fibonacci levels from the May–July rally ($58.80 to $67.10) include 61.8% at $62.20 and 50% at $63.00. The price’s recent retest of the 61.8% level ($62.20) on August 15 suggests this area is critical. A break above $63.00 would target the 38.2% retracement at $64.00, while a drop below $62.20 could lead to a test of $60.31.

Backtest Hypothesis

The backtested strategy of buying Trip.com on a MACD golden cross and holding for 10 days yielded a 166.01% return, outperforming the benchmark’s 40.99%. With a Sharpe ratio of 1.10 and no drawdowns, this strategy demonstrates strong risk-adjusted returns. Integrating this into the current analysis, the recent MACD golden cross in early August aligns with the strategy’s entry criteria. Given the confluence of bullish candlestick patterns, overbought RSI, and strong volume on the August 15 rally, the strategy’s success suggests a high probability of continued gains over the next 10 days. However, caution is warranted if the price fails to hold above $62.20 (Fibonacci 61.8% level), as this could invalidate the bullish setup.