ServiceMaster Global Holdings, founded in 1929, is a cleaning and pest control company headquartered in Memphis, Tennessee. The company went public in 2014 and has delivered very generous returns for its shareholders since. SERV stock took off from $11.54 in August 2014 and climbed to as high as $56.50 earlier this month.
A 390% total gain in less than five years creates the impression SERV stock is a “sure bet”. Unfortunately, there is no such thing as a sure bet in the markets. Furthermore, the Elliott Wave analysis below provides a pretty concrete reason to doubt SERV stock bulls’ efforts.
The daily chart above reveals ServiceMaster’s entire progress since its June 2014 IPO. It turns out the past five years have resulted in a fully-formed five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5) where the sub-waves of waves (1) and (3) are also visible.
According to the Elliott Wave theory, a three-wave correction follows every impulse. Instead of relying on the rally to continue, we should prepare for a significant bearish reversal. The support area of wave (4) near $35 – $30 a share is a natural target for the anticipated retracement.
If this count is correct, we can expect SERV stock to tumble by roughly 40% from current levels. The company’s high price to earnings ratio doesn’t bode well for the bulls’ ambitions either.
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