Warner Bros (WBD) Surges 7.40% on Strong Volume as Technical Indicators Signal Bullish Reversal

Warner Bros (WBD) has surged 7.40% on the most recent session, marking two consecutive days of gains with a cumulative 11.78% rise. This sharp upward momentum, coupled with elevated trading volumes (60.17M shares), suggests strong buying pressure. The price action indicates a potential bullish reversal pattern, as the stock has rebounded from a prior consolidation phase. Key support levels appear to be forming around the 10.78–10.91 range, while resistance is emerging near the 12.05–12.23 zone.

Candlestick Theory

Recent candlestick patterns, including a strong white candle on 2025-08-13 and a preceding bearish rejection on 2025-08-08, suggest a short-term bullish bias. The formation of higher highs and higher lows since late July implies a potential continuation of the uptrend. However, the absence of a decisive break above the 12.23 high (August 13) raises questions about the sustainability of this move.

Moving Average Theory

The 50-day moving average (currently ~11.30) has crossed above the 200-day MA (~10.50), signaling a bullish “Golden Cross.” The 100-day MA (~11.10) further reinforces this trend. Price remains above all three MAs, indicating a strong uptrend. However, the 50-day MA is approaching the 12.00 level, suggesting potential resistance ahead.

MACD & KDJ Indicators

The MACD histogram has turned positive, with the MACD line crossing above the signal line, confirming momentum. The KDJ oscillator (Stochastic RSI) shows overbought conditions (K=85, D=78), aligning with the RSI reading above 70. Divergence between price and KDJ, however, hints at a possible near-term pullback.

Bollinger Bands

Volatility has expanded, with the upper band at ~12.40 and the lower band at ~10.40. Price is currently near the upper band, indicating a high-risk zone for overbought conditions. A breakdown below the 11.30–11.50 corridor could trigger increased volatility.

Volume-Price Relationship

Trading volume has spiked to 60.17M shares, validating the recent price surge. However, volume is declining slightly on subsequent sessions, which may signal weakening momentum. A sustained increase in volume on a pullback could confirm a consolidation phase.

Relative Strength Index (RSI)

The 14-day RSI is at 72, indicating overbought conditions. While this may suggest a short-term correction, the RSI’s alignment with the MACD and KDJ oscillators increases the likelihood of a continuation of the uptrend. Traders should monitor for a RSI retest of the 60–70 range.

Fibonacci Retracement

Key Fibonacci levels from the July 10–August 13 rally (10.50–12.23) include 11.65 (61.8%) and 11.25 (38.2%). These levels coincide with prior support/resistance areas and could serve as dynamic zones for potential reversals or consolidations.

Backtest Hypothesis

The backtest strategy of buying WBD when RSI exceeds 70 and selling below 70 has yielded -30.10% returns since 2022, underperforming the benchmark. This poor performance underscores the limitations of relying solely on overbought signals in volatile markets. The strategy’s -0.66 Sharpe ratio and 0.00% maximum drawdown highlight its risk-averse nature but also its inability to capture sustained trends. Integrating confluence from moving averages and volume patterns could mitigate such drawbacks, emphasizing the need for multi-indicator validation in high-volatility environments.