Stock of the day: Volkswagen

A crucial battle is currently happening on Volkswagen shares as we speak. We analyze this company quite often as its price tends to accurately respect technical analysis principles. We last wrote about Volkswagen on the 7^th of February and pointed at a big descending triangle. The price was still inside the triangle waiting for a breakout and in consequence – a direction:

“The way to trade triangles is to wait for the breakout. So, if the price closes a day above the upper blue line, it would be a signal to go long. On the other hand, if the price closes a day below the yellow support, it would be a signal to sell.”

The breakout did happen yesterday and it was a bearish one. So that gives a sell signal, right? Well, not so much. It normally would but with the Russia-Ukraine tension it’s different. Over the last few days, we have had a real roller-coaster of emotions. Will Russia invade Ukraine? Will not? Will it?

Volkswagen dropped, as most other stocks, with the latest consensus being an imminent attack. The news from today though, is that some Russian soldiers are returning to their bases. So, there’s no invasion? I don’t know, I’m not better informed than intelligence agencies, all I see is the comeback of the risk on mode on the stock market.

All that, has allowed a false bearish breakout pattern (green), which is indeed a trading signal but, in this case, to the upside. The price closing the day above the yellow area, will be a signal to buy and the price closing the day below the yellow area will be a signal to sell.