Today Volkswagen AG opened with a gap to the upside of more than 3 figures. The question is what kind of gap this is – signaling for acceleration or for exhaustion? Fortunately, gaps often fit in the wave structure of price movements. On the chart below we see that this gap comes in the middle of wave 5. A completed impulse suggests that we should now expect a correction in three waves, that is very likely to cover the hole left by that gap. Furthermore, the RSI indicator is showing a strong bearish divergence, which is typical to occur between waves 3 and 5. Now we can answer the question – this is an exhaustion gap. It is the final burst of optimism, just when the rally is about to finish. However, the main trend in Volkswagen AG’s stock prices remains up, but it may need to rest a while. Prices could fall down, probably by 10 figures, reaching the zone of 185.00. If this happens, we will then have the opportunity to go long again, in order to catch wave (3)/C, which could easily reach the 200.00 mark.
