Warner Bros (WBD) Surges 4.42% on Bullish Patterns and Golden Cross Signals

Warner Bros (WBD) has surged 4.01% in the most recent session, marking a two-day rally of 4.42%. This upward momentum coincides with a recent consolidation phase following a sharp decline in early August, suggesting potential short-term strength. Key support levels appear to reside around the 11.28–11.36 range, where the stock found buyers multiple times during its pullback, while resistance emerges near 12.17–12.23, reflecting prior distribution zones. The candlestick pattern over the past week shows a bullish engulfing formation on 2025-08-13, followed by a confirmation rally, indicating a possible reversal from bearish to bullish bias.

Moving Average Theory

The 50-day MA (calculated from historical data) currently sits above the 200-day MA, forming a golden cross, which typically signals a bullish trend. The 100-day MA is also rising, aligning with the short-term momentum. However, the 200-day MA remains above the 50-day line, indicating lingering bearish pressure from longer-term investors. A key confluence point is the 11.85–11.99 level, where the 50-day MA intersects with a prior resistance-turned-support zone, suggesting potential for a breakout if volume confirms. Divergence arises in the 100-day MA, which has flattened recently, hinting at a possible slowdown in momentum.

MACD & KDJ Indicators

The MACD histogram has expanded positively over the past three sessions, with the MACD line crossing above the signal line on 2025-08-22—a classic buy signal. However, the KDJ stochastic oscillator shows the stock entering overbought territory (K=82, D=76), raising caution about a near-term correction. This divergence between momentum and overbought conditions suggests that while the trend is strong, a pullback may be imminent. The KDJ’s bearish crossover near 80 could act as a contrarian signal if volume remains robust.

Bollinger Bands

Volatility has widened recently, with the bands expanding from a narrow range in late July. The current price of 12.05 sits near the upper band, indicating overbought conditions and potential for a reversion to the mean. The middle band (20-day SMA) is at 11.75, suggesting a possible target for consolidation. If the price closes below the lower band (11.36–11.42), it would signal renewed bearish pressure, though the recent volume surge supports the upper band test.

Volume-Price Relationship

Trading volume has spiked to 49.6 million shares on the latest rally, a 20% increase from the prior day’s volume. This aligns with the price action, validating the strength of the breakout. However, the volume-to-price ratio suggests that while the move is supported, it may not be sustainable without further participation. A drop in volume during subsequent sessions could indicate waning conviction, particularly if the RSI remains overbought.

Relative Strength Index (RSI)

The RSI has surged to 68 over the past week, nearing overbought territory (70). While this suggests exhaustion in the short-term rally, it does not necessarily signal an immediate reversal, as the stock remains in an uptrend. A close above 70 would reinforce bullish momentum, but a failure to break that threshold could trigger a pullback toward 60–65. The RSI’s divergence from the price (which has risen while the RSI peaks) adds caution, though the overall trend remains intact.

Fibonacci Retracement

Key Fibonacci levels derived from the recent swing low (10.91 on 2025-08-08) and high (13.05 on 2025-08-01) include 12.23 (38.2%), 11.85 (50%), and 11.36 (61.8%). The current price is testing the 38.2% retracement level, which aligns with the upper Bollinger Band and prior resistance. A break above 12.23 could target the 12.87–13.05 range, while a retest of 11.85 would confirm the 50% level as dynamic support.

Backtest Hypothesis

The backtest of a MACD golden cross strategy from 2022–2025 yielded a -48.75% return, significantly underperforming the benchmark. This poor performance may stem from conflicting signals between the MACD and other indicators, such as the KDJ and RSI, which often signaled overbought conditions during the same period. Additionally, the strategy’s reliance on a single momentum oscillator likely failed to account for divergences in volume and Fibonacci levels, leading to false entries. The high maximum drawdown (0.00%) and negative Sharpe ratio (-0.35) underscore the strategy’s vulnerability to volatility and lack of risk-adjusted returns.