The Spanish bank Bankia (BME: BKIA) advances in a terminal structure as an ending diagonal pattern, which could suggest the exhaustion of the current bearish cycle.
Bankia, in its 2-hour chart, exposes a short-term bearish sequence in five waves that looks incomplete. The downward structural series began in early January 2020, when the price found sellers at €1.9890 per share and could have found its bottom at €0.8218 on May 14th.
According to Elliott wave theory, an ending diagonal pattern is an impulsive structure subdivided into five internal overlapped segments that follows a 3-3-3-3-3 sequence. This Elliott wave formation tends to appear in waves "5," and "C" and its appearance suggests the exhaustion of the trend and its imminent reversion.
Currently, the Spanish bank runs in its fifth wave of Minuette degree identified in blue. At the same time, BKIA could have finished its fifth wave of Subminuette degree identified in green. However, the bearish bias remains intact.
While the price action remains below the upper trendline that connects the end of waves ii and iv of Subminuette degree, the short-term trend will continue on the bearish side. In this sense, once the price action breaks and closes above the waves ii-iv guideline, BKIA will confirm the end of the bearish fifth wave.
After the potential bullish breakout, Bankia would develop a bullish sequence of the same degree than the previous decline.
On the other hand, the RSI oscillator looks to test the 60 level, which suggests a scenario of potential exhaustion of the bearish cycle in the course. In consequence, BKIA could show bounce signals in the coming trading sessions.
In conclusion, in view that an ending diagonal pattern suggests the exhaustion of the bearish trend in progress and considering that the RSI oscillator warns us about a potential bounce, our preferred positioning in BKIA turns from neutral to bullish expecting the confirmation of a bullish close before positioning us on the long-side. The next resistance levels locate at €1.0476, €1.2416, and €1.4572 per share.