IBEX 35 index forms a risky pattern ahead of the Puig IPO

The IBEX 35 index plunged hard on Tuesday led by Spanish banks like BBVA, Santander, and Caixabank. It crashed by more than 2.2%, its worst daily performance since March last year. It has now dropped by over 3.35% from its highest level this year.

Puig IPO ahead

Spanish banks suffered a harsh reversal even after major developments in the country. BBVA, the second-biggest bank after Santander, approached Banco Sabadell for a deal that would create a financial behemoth. If the deal goes on, it will be the biggest European bank merger in years. 

The merger would also likely spur more consolidation in the European banking industry, a move that has been supported by the European Central Bank (ECB). Most banks in the region have surged this year, helped by the impact of high interest rates in the region.

Banco Sabadell’s stock price has jumped by over 61% this year, making it the best-performing company in the IBEX35. Similarly, Caixabank shares have soared by over 32% while BBVA and Santander have risen by 23% and 21%. 

Looking ahead, the next important catalyst for the IBEX 35 index will be the upcoming Puig IPO. Puig, the parent company of Banderas, Dries Van Noten, Apivita, and Carolina Herrera, is set to go public on Friday.

Recent disclosures show that the company is planning to raise 3 billion euros in a deal valuing it at over 13.9 billion euros. If this happens and the company maintains its valuation, it could be the next entrant to the index.

Its valuation would make it the 15th biggest company in the IBEX 35 index. It will be bigger than popular names like IAG, the parent company of British Airways, Redeia Corporacion, Mapfre, and Acciona.

Puig will also be the biggest luxury group company in Spain at a time when other luxury brands like Hermes and LVMH are doing well.

IBEX 35 index forecast

IBEX chart by TradingView

The IBEX 35 index retreated sharply on Tuesday as European inflation remained stubbornly high. A report by Eurostat showed that the bloc’s inflation came in at 2.4% in April.

Looking at the daily chart, we see that the IBEX index pulled back sharply on Wednesday. It has crashed below the important support at €11,132, its highest swing on March 27th. The index has also formed a double-top pattern, which is one of the most dangerous patterns in the market.

The IBEX index has moved above the 50-day and 100-day Exponential Moving Averages (EMA), which is a bullish sign. Also, the MACD indicator has drifted downwards in the past few days.

Therefore, I suspect that the index will retreat and retest the crucial support level at €10,500. This price is the neckline of the double-top pattern. Conversely, a move above the crucial resistance at €11,215 will point to more upside.

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