The Volkswagen (XETR: VOW) price completed an Elliott wave pattern identified as a Leading Diagonal on April 30th, which currently experiences a corrective move, which could accelerate on the following trading sessions.
VOW, in its 2-hour chart, shows a leading diagonal pattern, which began on March 23rd, when the price found fresh buyers at €99.2 per share.
According to the Elliott Wave Theory, a leading diagonal is formed by five internal segments overlapped one each other. This formation follows a subdivision as 3-3-3-3-3. The leading diagonal tends to appear in the first wave or wave A after an aggressive movement. Another characteristic is that the first segment should be the longest in extension, followed by the third segment, and the fifth leg should be the shortest. On the chart, we distinguish that the first wave advanced €29.8, followed by the third wave that raised €26.9, and finally, the fifth leg climbed only €21.7 per share.
The measures observed, drives us to conclude that Volkswagen formed a theoric leading diagonal pattern, and its sequence achieves the technical requirements of its construction. Once the price action completed the first impulsive structure at €148.9 per share, VOW began to decline in a corrective sequence as a zigzag pattern.
Currently, the wave (c) of the Minuette degree labeled in blue looks incomplete. In fact, the stock price seems moving bearish in its wave iii of Subminuette degree identified in green. On the other hand, the RSI oscillator shows the aggressive sell-off sentiment corresponding to wave iii of Subminuette degree labeled in green. Likely, VOW could find support in the previous swing low corresponding to the end of wave (a) in blue at €128.2 from where the price could start to consolidate before to resume its declines.
For the following trading sessions, we foresee further declines that could reach the range between €118.2 and €109.8 per share. The bearish sentiment would remain on the sell-side while the price action continues moving below the trendline that joins the origin of wave (a) and the end of wave (b) in blue. Finally, the bullish breakout of this descending guideline will confirm the change of bias from bearish to bullish.