Last week, Banco de Sabadell SA stock (BME: SAB) popped above the August high, at 0.378, possibly opening the door to further advances. The uprise came after its Spanish rivals, Bankia SA (BME: BKIA) and CaixaBank SA (BME: CABK) announced that they are in talks of a possible merger. BKIA and CABK were also the ones that shot up, as such a merger might automatically create the largest bank in Spain, with assets of more than EUR 650bn. A possible new joint venture of those two Spanish financial institutions could establish the largest domestic loans and deposits provider by market share. Now the reason SAB moved higher was that such talks might be opening a window of opportunity for other smaller Spanish banks, like Bankinter or Banco de Sabadell, to do something similar. These “marriages” might help stabilise the financial system in Spain, however some are worried this could create less competition. Since the last financial crisis, the number of Spanish banks had already diminished at least four times.
As already mentioned above, the Banco de Sabadell stock had moved above the August high, at 0.378, this way confirming a forthcoming higher high. SAB then made its way to the 0.409 hurdle, where yesterday it found resistance and then corrected lower. Today, we are seeing that the buying interest had picked up again, as the price is trying to make its way back to that 0.409 barrier. Although there is a chance to see some higher areas in the near-term, to get a bit more comfortable with that idea, we would like to wait for a push above yesterday’s high first.
If, eventually, the stock shoots above that 0.409 zone, this will confirm another forthcoming higher high, possibly inviting even more buyers into the game and opening the door for a move to the 0.425 obstacle, marked by the low of April 3rd. If the buying doesn’t stop there, the next potential resistance area to consider might be near the 0.453 level, which is the high of April 14th.
The RSI is well above 50 and still pointing higher. The MACD continues to confidently move north, while running high above the zero and trigger lines. Both oscillators still suggest a rising upside price momentum, which supports the above-discussed scenario.
Alternatively, if the price slides below the 0.378 zone, or the 0.373 hurdle, marked by the highest point of August and yesterday’s low, that could temporarily spook the bulls from the field. If so, the stock might go further south, potentially aiming for the 0.351 hurdle, a break of which may clear the path to the 0.338 level. That level is marked near the high of September 3rd and the low of September 4th.
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