Stock of the day: BMW

It’s the first week of trading in May, and we’re wrapping with analysis of BMW. Previously, we’d mentioned this instrument at the end of March, when the price was below the crucial long-term resistance and we were seeing a great selling potential there:

“This comeback will be more probable once the price breaks the lower line of the wedge, and that’s the signal that we’re currently waiting for here. The price breaking from the wedge to the downside will be a strong sell for BMW. On the other hand, the price climbing back above the blue resistance will be a signal to buy but this scenario is less likely to happen.”

That was a good call, as almost immediately, the price went lower breaking the lower line of the wedge. The drop stopped on the 23,6% Fibo and then BMW went higher, making another attempt to break the 50% Fibonacci. The try was unsuccessful, and that created a very handsome bearish setup – a double top bouncing off a crucial horizontal resistance.

In order to get a proper long-term sell signal, we need to see the breakout of both blue lines and the 23,6% Fibonacci. Chances for that are quite significant because of global sentiment, which collapsed yesterday.

The negative sentiment will be cancelled when the price comes back above the 50% Fibo, although that does not seem likely at the moment.