Volkswagen shares have formed a double top on the weekly time frame, indicating uptrend exhaustion. News of the company cheating on its emissions tests for its vehicles triggered a break below the neckline and a large gap down for its stock this week.
With that, Volkswagen shares could face further downside, possibly until the next support at around $20/share. Stochastic and RSI are both indicating oversold conditions though, with the former starting to indicate a move back up. The gap from the $40/share area could still get filled if the company issues a statement dismissing these allegations, although the path of least resistance is to the downside.
The 100 SMA is above the longer-term 200 SMA for now, suggesting that there’s a chance for the climb to resume. However, the moving averages seem to be gearing up for a downward crossover to confirm the likely selloff.
Volkswagen Shares Forecast
Volkswagen has been forced to halt its sales of some models to the U.S. when the Environmental Protection Agency alleged it had used a piece of software to lower emissions during testing in order to circumvent clean air standards. The selloff on Monday led to a wipeout of around $15.8 billion of the company’s market value, prompting investors to liquidate their holdings.
Despite that, the company has maintained that it would cooperate fully with the investigations. Keep in mind, however, that Volkswagen shares have already been under heavy selling pressure due to weaker demand from China spurred by the country’s yuan devaluation recently.
Apart from that, the likely slowdown in Europe is also set to weigh on Volkswagen sales, dragging its stock lower in the coming months. The fallout is putting the company’s leadership in question, with a shakeup likely to weigh further on investor confidence in the company.
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