Volkswagen got caught cheating on diesel-emission tests, which, according to Bloomberg, threatens BMW and the whole automobile market as well. Many analysts say this is the reason BMW shares have been falling this week. Indeed, the stock fell below the 72-euro mark, but did we need an emission scandal to realize BMW is in trouble?
On February 15, 2015, we posted “BMW With Two Choices Above 100”. With prices near 107.70, our primary Elliott Wave count suggested “BMW has almost finished wave (3/C) and we should prepare for at least a temporary pull-back.” Let’s take a look at this analysis.
As visible, it was looking like BMW is the final stages of wave (3/C). Once it was over, the minimum we could expect was a wave (4) correction. A little over a month later, on March 17th, BMW stock climbed as high as 123.62. And this is the point, where wave (3/C) finally ended. In other words, the current decline, which many think is caused by the emission scandal, actually began more than six months ago. So, once again, we have a proof of the fact, that instead of causing the market to move, the news only follows it. The chart below shows how BMW stock looks like today.
It turns out the news only follows the natural collective market psychology, whose swings could be predicted with the Elliott Wave Principle. The recent sell-off is definitely not a fourth wave. It is something bigger. That is why we believe a short-term recovery might or might not occur soon, but the overall market direction remains to the downside.
