Volkswagen AG (VLKAF) is in the news after a meeting with President Trump on Tuesday. Volkswagen CEO Herbert Diess found a way to get in front of the tariffs on autos and gave a presentation of the company's possible options for increasing American-based automotive production. Let's see what the charts look like even though our markets are closed here on Wednesday.
In this daily bar chart of VLKAF, below, we can see two trend lines. There is a downtrend from January to late October, but there is also a sideways trend from July. The sideways trend is basically defined by the sideways 50-day simple moving average line. Chartists with a good imagination might call the pattern of the last five months a diamond pattern. In November VLKAF was trading above and below the flat 50-day line. VLKAF is below the declining 200-day line, but a rally above the September high will break the average line and break VLKAF out of its sideways pattern.
The daily On-Balance-Volume (OBV) line is very interesting and very bullish, in my opinion. The OBV line has been rising the past year even while prices have weakened. I associate a rising OBV line with more aggressive buying as heavier volume is transacted on days when the stock has closed higher. The Moving Average Convergence Divergence (MACD) oscillator has been hugging the zero line in November, but a rally in the stock should turn the MACD oscillator up and generate a go-long signal.
In this three-year weekly bar chart of VLKAF, below, we can a slow rally from early 2016 to a zenith in early 2018. Prices have corrected down to support in the $160-$150 area. Prices are below the declining 40-week moving average line. A weekly close above $180 not only will break the moving average line but also break above the September high. The weekly OBV line has improved from August, but the pattern over the past three years is positive. The weekly MACD oscillator crossed to a cover-shorts buy signal in September and it continues to inch up toward the zero line.
Bottom line strategy: With the global equity markets acting like the fall of 2007 it is refreshing to see a five-month sideways/base pattern. Some market watchers might call it a diamond pattern. Diamond patterns, like the name suggests, are relatively rare. They can be reversals, but they also can be continuation patterns. A strong close above $180 should tell us that this is a reversal pattern. Aggressive traders could go long above $180, risking below $155.