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Technical Update - UBS Group: Indicators sending signs of trend exhaustion. Will Earnings change that?

Equities 3 minutes to read
KCL
Kim Cramer Larsson

Technical Analyst, Saxo Bank

UBS Group has during its strong uptrend since July performed two Gaps. Normally there are three gaps during a strong bullish trend: Break-away, Continuation and Exhaustion gap. An Exhaustion gap is a gap higher before the trend exhausts and trend reverses.
We are missing one. Could we see an Exhaustion gap when UBS report Earnings later this week?

Both Volume and RSI are indicating weakening of the trend with divergence as illustrated by the falling dashed lines.  
The high close 28th August did not correspond to a higher RSI value and Volume has been steadily declining since the Break away gap.
(Divergence – where price is moving higher but indicator values are declining - indicates an imbalance of the trend – it is simply getting weaker. It is not a top and reversal signal but a warning sign of a trend is likely to exhaust)
 
However, a new higher close in UBS could cancel the divergence.
If instead market gets disappointed sending UBS to close the 2nd gap i.e., closing below 21.32 it could be hit with a larger sell-off/correction that could take the share price down to test the upper level in the Break away gap at 20.

ubs d 2908
Source all charts and data: Saxo Group
Weekly chart is showing RSI divergence but a price gap higher could cancel just that. It would need a weekly RSI close above the horizontal dashed line.
If we do not see UBS closing below the 2nd gap but instead is moving higher, the bullish trend could continue a few weeks more to the 1.382 projection at 23.32, possibly to the 1.618 projection at 24.85
ubs w 2908
Monthly chart. UBS is close to its strong resistance at around 22.25-22.55.  A close above could pave the way for higher levels towards 32-32 longer-term. Resistance at around 25.75
A rejection could initiate a correction as mentioned above
ubs m 2908

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