The German-based Siemens AG (Xetra:SIE) could be developing a leading diagonal pattern, which suggests the possibility of a new rally.
The short-term picture of SIE, reveals in its hourly chart, that the price action raised in an Elliott wave structure as a leading diagonal. According to the textbook, this technical formation tends to appear in the first wave and acts like an impulsive structure.
Fig 1 - Siemens 1H Chart
Currently, Siemens depicts its fifth wave (v) of Minuette degree (labeled in blue) intact. This intraday upward bias will keep being valid as long as the price continues moving above the trendline that links the origin of the wave a of Subminuette degree identified in green with the end of wave b of the same degree.
However, the RSI oscillator, acting as a leading indicator, shows the breakdown of its trendline, which suggests the possibility of a latent decline on the German stock. In this context, once SIE completed its five-wave sequence in progress, the price will end a wave ((i)) of Minute degree and will give way to a corrective structure. Thus, the price action should retrace the previously developed advance in a three-wave structure. it is likely the action will move down its price to a zone between 38.2% and 50% of the Fibonacci retracement, where Siemens' price could begin a new rally.
According to the Elliott wave theory, the deeper the retracement experienced by Siemens in the development of the resulting corrective sequence, the lesser the bullish momentum of the next rally. In consequence, for the coming trading sessions, we expect a decline corresponding to the second wave of Minute degree, which should not be deeper than the extension of the upward sequence. The completion of the downward three-wave sequence would give way to a rally that could carry Siemens to reach the 100 EUR per share.
Finally, if the market action drags SIE's price to below the 58.77 level, our bullish scenario will be invalid, and we may expect further declines.