Warner Bros Shares Rally 7.45% as Bullish Patterns and Moving Averages Fuel Optimism

Warner Bros (WBD) has experienced a two-day rally, with a cumulative gain of 7.45% as of the most recent session. The recent price action suggests a potential short-term bullish bias, supported by a combination of candlestick patterns and key support/resistance dynamics. A bullish engulfing pattern formed on September 18-19, with the closing price surmounting the previous day’s high, indicating strong buying pressure. Key support levels emerge around $17.58 (September 17 low) and $12.57 (September 10 low), while critical resistance is observed at $19.49 (September 16 high). A breakdown below $17.58 could trigger a retest of the $12.57 level, whereas a sustained break above $19.49 might target $19.595 (September 15 high).

Moving Average Theory

The 50-day, 100-day, and 200-day moving averages form a bullish alignment, with the 50-day MA currently above both the 100-day and 200-day MAs. The 100-day MA (~$13.50) acts as dynamic support, while the 200-day MA (~$10.70) provides a baseline for long-term trend validation. The price’s retest of the 50-day MA (~$16.50) in late August suggests a potential continuation of the upward bias. Confluence between the 50-day MA and the 100-day MA crossing above the 200-day MA (a “golden cross” signal) in mid-September further reinforces a medium-term bullish outlook.

MACD & KDJ Indicators

The MACD histogram has shown positive divergence in early September, with expanding bars accompanying the recent rally. A crossover of the MACD line above the signal line on September 18-19 confirmed a short-term bullish momentum shift. The KDJ stochastic indicator, however, reveals overbought conditions (stochastic %K > 80) in late August and early September, suggesting potential exhaustion. Divergence between the RSI and KDJ indicators during this period raises caution about a near-term correction.

Bollinger Bands

Volatility has expanded recently, with the bands widening from a narrow contraction in mid-August. The current price (~$19.33) sits near the upper band, indicating overbought territory. A retest of the lower band (~$17.00) could occur if the 200-day MA fails to hold, but the recent breakout above the upper band suggests a potential continuation of the uptrend.

Volume-Price Relationship

Trading volume has surged in the past two sessions, with a 3.37% gain on September 19 accompanied by a volume spike (168.26M shares). This validates the strength of the rally, as higher volume aligns with price advances. Conversely, a decline in volume during pullbacks (e.g., September 16-17) suggests weakening bearish conviction. However, the recent volume surge must be sustained to confirm the trend’s durability.

Relative Strength Index (RSI)

The RSI has entered overbought territory (>70) since mid-September, but its trajectory remains elevated amid the uptrend. A potential divergence between RSI and price action (e.g., a lower high in RSI despite a higher price high) could signal a near-term reversal risk. Historical context shows the RSI frequently fluctuating between 60-80 during the rally, suggesting the uptrend may persist unless the RSI drops below 50.

Fibonacci Retracement

Key Fibonacci levels derived from the August 11 low ($10.76) to the September 16 high ($19.595) include 61.8% at $16.80 and 78.6% at $18.20. The current price (~$19.33) exceeds the 78.6% level, indicating a potential target of $19.595 (100% retracement). A breakdown below the 61.8% level could trigger a retest of the 50% level (~$15.18).

Backtest Hypothesis

A backtested strategy leveraging RSI-driven signals (buying at oversold levels <30 and selling at overbought levels >70) achieved a 63.65% return from 2022 to the present, outperforming the benchmark by 18.52%. This aligns with the current RSI trajectory, where the overbought condition suggests a sell signal. However, the confluence of bullish momentum indicators (MACD, moving averages) implies the uptrend may persist despite overbought RSI. The strategy’s robust Sharpe ratio (0.43) and zero maximum drawdown highlight its risk-adjusted efficiency, though recent volatility increases necessitate caution.