Banco Santander Posts 2.97% Gain as Bullish Candle and Moving Averages Signal Short-Term Reversal Amid Overbought RSI

Candlestick Theory

The recent price action for Banco Santander (SAN) reveals a strong bullish candle on October 13, with a 2.97% gain closing at €10.04, forming a long upper shadow and a narrow body. This suggests buying pressure near the upper end of the trading range. Key support levels are identified at €9.72 (October 10 low) and €9.44 (September 3 low), while resistance clusters emerge at €10.07 (October 13 high) and €10.34 (October 2 high). A breakdown below €9.72 may trigger further bearish momentum, whereas a breakout above €10.34 could signal a reversal from a descending channel pattern.

Moving Average Theory

The 50-day moving average (currently around €9.92) is above the 200-day MA (€9.69), indicating a short-term bullish bias. However, the 100-day MA (€9.85) is converging with the 50-day, suggesting potential consolidation. A crossover of the 50-day below the 100-day would likely confirm a bearish shift. The price has recently tested the 50-day MA as dynamic support, with a successful rebound reinforcing its role as a short-term floor.

MACD & KDJ Indicators

The MACD histogram has shifted from negative to positive territory, with the MACD line (€0.12) crossing above the signal line (€0.08), hinting at a bullish crossover. However, the KDJ indicator shows the %K line (34) rising above the %D line (30), aligning with the MACD’s bullish signal. While these suggest momentum favoring buyers, the RSI (73.1) is in overbought territory, cautioning against immediate trend continuation. Divergence between the KDJ and MACD may emerge if volume fails to confirm the rally.

Bollinger Bands

Bollinger Bands have expanded to a width of €0.365 (upper band at €10.23, lower band at €9.86), reflecting heightened volatility. The price’s proximity to the upper band (€10.04 vs. €10.23) suggests overbought conditions, increasing the likelihood of a pullback. A retest of the lower band (€9.86) could act as a potential support zone, but sustained trading beyond the bands would signal a breakout.

Volume-Price Relationship

Trading volume surged to 4.25 million shares on the October 13 rally, validating the move higher. However, volume has been mixed in prior sessions, with a 1.40% gain on October 8 accompanied by 3.19 million shares, versus a 1.91% drop on October 10 with 4.00 million shares. This asymmetry suggests uneven conviction, with bearish volume outpacing bullish volume. A continuation of the rally would require progressively higher volumes to sustain momentum.

Relative Strength Index (RSI)

The RSI (73.1) is in overbought territory, a level that historically precedes corrections. While this does not guarantee an immediate reversal, it signals caution for short-term traders. The RSI’s recent divergence from price (a lower high in price with a higher RSI peak) adds to bearish concerns, though a break above 75 could extend the uptrend.

Fibonacci Retracement

Key Fibonacci levels between the recent high (€10.34 on October 2) and low (€9.44 on September 3) include 38.2% at €9.92 and 61.8% at €10.13. The current price (€10.04) is testing the 38.2% retracement level, which could act as a pivot. A break above 61.8% (€10.13) would validate a deeper bullish move, while a failure to hold above €9.92 may trigger a retest of the 50% level (€9.89).

Backtest Hypothesis

The backtest strategy, based on buying when RSI falls below 30 and selling when it exceeds 60, revealed underperformance relative to the benchmark. From 2022 to 2025, the strategy returned 30.52% versus the benchmark’s 41.09%, with a Sharpe Ratio of 0.22 and volatility of 74.47%. The negative excess return (-10.57%) and minimal drawdown (0.00%) suggest the strategy’s signals were less effective during a strong bull market. This aligns with SAN’s recent fundamentals—record profits and aggressive buybacks—which drove sustained price appreciation, reducing the frequency of RSI-based entry/exit signals.