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Why Fiat Chrysler Stock Was Trading on a Mixed Note in May 2018

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Nov. 20 2020, Updated 4:36 p.m. ET

Fiat Chrysler stock

Last week, Fiat Chrysler stock (FCAU) fell 3.7% to settle at $21.86. In the previous week, the stock lost ~1%. April proved to be a good month for FCAU, as its stock recovered 6.4% after falling in the previous two months. As of May 21, the company has delivered 2.3% MTD (month-to-date) positive returns as compared to 3.2% gains in the S&P 500 Index. Now, let’s find out what could be hurting FCAU’s stock in May.

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Recent developments

According to a recent Bloomberg report, the management of Fiat Chrysler’s Italy-based subsidiary VM Motori was aware of its illegal software use to bypass emission regulations. The report cited email conversations from 2010 among VM Motori’s employees. The emails were disclosed in court last week. This recent development in the investigations against FCAU hurt its stock last week. The downward movement could extend further if a hefty fine is imposed on the automaker after the investigation.

The controversy began in January 2017 when the EPA (Environmental Protection Agency) alleged that Fiat Chrysler might be using hidden software to violate the Clean Air Act. Following this allegation, the US Justice Department filed a lawsuit against FCAU and VM Motori in May 2017.

Technical overview

As of May 21, FCAU was trading at $22.34 with about 8.9% gains in Q2 so far. By comparison, automakers (XLY) General Motors (GM), Ford (F), and Tesla (TSLA) have risen 4.8%, 3.9%, and 6.9% quarter-to-date, respectively.

In May so far, the stock has largely been trading in a narrow price range of $22.10 to $22.90. Only an early violation of the $22.90 price range could confirm positive bias and attract fresh buying in the stock. On the daily price chart, the 14-period setup of RSI (relative strength index) indicator was below the line of equilibrium at 47.3, showcasing weakness in the momentum.

Continue to the next part where we’ll look at the recent price action in Tesla stock.

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