Stock of the day: Volkswagen

The correction the market is seeing has accelerated, which has woken up bearish hopes for a bigger drop. In today’s analysis, I would like to present to you Volkswagen, which is pretty much falling into this narrative and we do have a really nice sell signal here.

Since March, Volkswagen was inside a symmetric triangle pattern, close to all-time highs. As it usually is with triangle patterns, volatility decreasing over time and the price was moving sideways. This formation has to end up with a breakout and those breakouts tend to give a proper trading signal. You guessed right, a breakout on Volkswagen happened yesterday.

So, the price escaped from the triangle to the downside, giving us a proper sell signal. This negative sentiment is continuing today, so we can assume that it was not a one-day incident. As long as the price stays below the lower line of the triangle, the sell signal is on. The price coming returning into the triangle would cancel this signal, but the chance of this happening is very low.