Market Analysis

New trouble for Volkswagen as SEC moves to prosecute

The United States Securities and Exchange Commission (SEC) has accused Volkswagen of massive fraud in the so-called „Dieselgate“ scandal and is now suing the Volkswagen Group. There are accusations that Volkswagen had claimed that the vehicles it produced were more environmentally friendly than in reality.

According to estimates, the Dieselgate scandal has cost the company about US$30 billion so far. Nevertheless, the company was able to sell 10.83 million vehicles in the past financial year and generate an after-tax profit of €12.1 billion for 2018. For the current year, the Board of Management expects headwinds in important markets to become even stronger during 2019. The company is currently planning to continue concentrating on e-mobility and to cut several thousand jobs by 2023. This should also lead to operating-cost savings of almost €6 billion. On the other hand, investment in electric cars will be increased by several billion euros over the next few years. Volkswagen’s goal is to make an electric vehicle suitable for the masses. How could all of this affect the share price?

The share has been trading sideways at a high level since the beginning of July 2018. The band has a width of €138 to €155. Only when a sustained breakthrough occurs through one of these bands can statements be made about the further, longer-term direction. In the short term, the two boundary lines could serve as support and resistance promoting the sideways movement. The MACD indicator is currently bearish. The MACD line is below its trigger line, and the histogram is negative. If this bearish trend prevails and the stock breaks through the lower band, there could be structural support in the €128.30 region. However, if the market succeeds in breaking through the upper barrier, the area around €166 could prove to be a first resistance level on the way to the significant structural level in the €174.70 range.

VOW3.GE Daily Chart  Source: ActivTrader


Written by Daniel Schuetz, External Analyst.

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