Polish e-commerce leader Allegro.eu just raised its outlook for GMV, revenue and EBITDA after its H1 results surpassed expectations. The company also said that business growth accelerated further in the first 10 weeks of Q3, fueling a 5% share price jump today, as of this writing.
On the other hand, most of today’s good news seems to have been priced in well in advance given the stock’s 53% year-to-date gain. So perhaps extrapolating the recent past into the future is not such a good idea, even if the fundamentals remain strong. Instead, let’s turn our attention to the chart below, which allows us to examine this year’s surge from an Elliott Wave perspective.
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It reveals that the sharp rally from 25.53 to over 47 zlotys is a textbook five-wave impulse. We’ve labeled the pattern 1-2-3-4-5, where two lower degrees of the trend are visible within the structure of wave 1, while wave 4 is a triangle, marked a-b-c-d-e. If this count is correct, Allegro.eu is now climbing in wave 5 towards 50 zlotys per share.
Unfortunately for the bulls, a three-wave correction follows every impulse. So instead of seeing the new multi-year high as a buy signal, we’re preparing for a 20% retracement to roughly 40.00 before the larger uptrend can resume. With that in mind, investors can decide whether to simply wait it out or trade accordingly. Whatever they choose, Allegro’s long-term future remains bright and wave (3) should eventually lift the stock to much higher highs.
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Disclosure: The author closed his long position in Allegro.eu stock in the EWM Interactive portfolio on the day this article was published for a 62.8% gain.
