In a little over 8 business days, the German automotive giant Volkswagen has dropped an astonishing 40%, falling from €161 to €97. This is certainly the largest ever short term move in the company’s history. But what is the catalyst for this disproportionate move lower? VW has been found to have fitted software on diesel cars sold in the US, which artificially improve the emissions efficiency on its cars. Roughly 11 million cars have been fitted with this software, now known as a ‘defeat device’. The result means that the cars affected actually emitted nitrogen oxide pollutants up to 40 times the legal limit in the US. Volkswagen has admitted its role in this and now stands to receive a potential fine of $37,000 for every car affected, meaning in total it could be looking at a maximum fine of $18 billion; the numbers are truly amazing. Going forward, care must be taken. The chart technical setup is extremely negative, with the short term moving averages all above the current share price and you have to go back as far as 2008 to find the first support level, coming in at around €77.50
Senior Trader, Jordan Hiscott
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