3i stock was hovering around 1100 pence per share when we wrote about it in late-October 2019. The stock was up almost 1000% in ten years and few thought it was vulnerable to a significant decline. That was five months ago – before the coronavirus pandemic and the global stock market crash it triggered.
But instead of simply extrapolating the 3i’s past performance into the future, we chose a different route. Our Elliott Wave analysis of the stock’s weekly chart revealed a worrying picture. Take a look at it below to refresh your memory.
A quick look at 3i stock ‘s weekly chart revealed a textbook five-wave impulse from the bottom in March 2009. The pattern was labeled (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave 3 were visible, as well. According to the theory, a three-wave correction follows every impulse.
3i Stock Erased Four Years of Gains in just a Month
So instead of joining the bulls near 1100, we decided to “observe from a safe distance” in anticipation of at least a 35% drop. Fifth waves are usually fully retraced by the following correction, so we thought the support near 700 was a reasonable bearish target. Little did we know that this estimate was too optimistic.
3i stock held above 1000 for a while until mid-February when investors realized COVID-19 was more than just a Chinese problem. A month later, on March 18th, the price touched 530 pence a share. From top to bottom, shareholders lost 55.4%. And while the pandemic came totally out of the blue, the Elliott Wave stage for this crash was set months earlier.
What is interesting is that the bears seem to have given up precisely at the 61.8% Fibonacci support level. The decline from 1189 can be seen as a complete (a)-(b)-(c) zigzag. This means the entire 5-3 wave cycle from the 2009 bottom is also complete.
If this count is correct, the price can be expected to move in the direction of the impulse pattern from here. In the long-term, the bulls should be able to lift 3i stock to 1200 and beyond.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!