Volkswagen ADR (OTC: VLKAY)
Volkswagen is starting off the new year on some rough news as the Department of Justice filed suit today alleging they installed illegal emissions devices into roughly 600,000 diesel-engine vehicles. Shares took a beating in the premarket and opened the day down nearly 3%. According to MarketWatch the complaint “filed on behalf of the Environmental Protection Agency, alleges the German auto maker violated the Clean Air Act by making and selling vehicles that were designed differently from what Volkswagen had stated in applications for certification to the EPA and another regulator, the California Air Resources Board.” (MarketWatch) The fines will definitely have a huge impact on VLKAY’s bottom line so we’ll just have to wait and see how much it’s going to cost them.
VLKAY, like most stocks, started the year off red but market weakness wasn’t the only thing dragging this stock down. The complaint filed by the DOJ sent shares tumbling in the premarket session and opened the day at $30.02, down 3% from the close on Thursday at $30.97. Shares are well below the 200-day moving average on the daily chart currently sitting at $39.11 and is now looking to test the 50-day moving average at $28.41 with all the selling pressure mounting up. We should see some support come in at $28 and $25 price levels while resistance will be met at the $30.72 and $31.70 levels.
Looking back at the daily chart you can see that VLKAY has been walloped after reaching highs of $52.87 at the beginning of 2015 and then hitting lows of $22.71 in October after news started to circulate about the emissions problem. Back in July a death cross appeared on the their chart and since then have continued to sell off. There was a bit of a relief coming into the close of the year as shares traded back into the low 30s but that didn’t last long and I would expect shares to be trading back in the 20s fairly soon. We’ll have to keep an eye on VLKAY going forward to see how badly these fines will impact share prices but as of right now, I would only be interested on the short side.
Volkswagen AG engages in the manufacture of automobiles. It operates through following segments: Passenger Cars, Commercial Vehicles, Power Engineering, and Financial Services. The Passenger Cars segment covers the development of vehicles and engines, the production and sale of passenger cars and light commercial vehicles, and the corresponding genuine parts business. The Commercial Vehicles segment comprises the development, production and sale of light commercial vehicles, trucks and buses, the corresponding genuine parts business and related services. The Power Engineering segment consists of the development and production of large-bore diesel engines, turbo compressors, industrial turbines and chemical reactor systems, as well as the production of gear units, propulsion components and testing systems. The Financial Services segment engages in dealer and customer financing, leasing, banking and insurance activities, as well as fleet management. The company was founded in May 28, 1937 and is headquartered in Wolfsburg, Germany. (MarketWatch)