Almost a month ago, on April 9th, we showed you our analysis of Volkswagen AG’s stock, stating that the uptrend on the 1-hour chart looks exhausted and a pull-back should be expected. On the chart below you can see how the situation looked like back then.
As shown, we were expecting a decline in three-waves, because as the Elliott Wave Principle postulates, after every five waves, a three-wave correction in the opposite direction should follow. That is why we were pessimistic about Volkswagen, despite that large gap to the upside. The chart below will show you how the situation has been developing since our forecast.
Prices reached a little higher, only to touch the upper line of the trend channel, where they found strong resistance and fell in three waves from nearly 200.00 to as low as 187.30. So everything has been going according to plan. Maybe you are noticing that we are not mentioning the P/E ratios, dividends, sales or anything about the investment plans of Volkswagen AG. Truth is we do not need and we do not use such information, because charts are the first to register and absorb trader’s and investor’s opinions of any market, far before those reports are published. Even more important is the fact, that those opinions are rarely rational. People, including investors, are far more emotional, than they are willing to admit. So the proper tool must be one, which can analyse emotions, instead of economic data. This is where the Elliott Wave Principle steps in. Now we have a very clear 5-3 Elliott Wave pattern, which tells us that Volkswagen AG’s stock is ready for another rally in wave (3)/C, in which the 200.00 mark should be easily overtaken. This count would be invalidated, only if prices fall down to 175.00.
