Alteryx Inc., a self-service data analytics software provider, saw its shares soar 28% in pre-market trading today. The surge was caused by the better-than-expected Q3 revenue guidance the company issued yesterday. Apparently, the news that AYX was going to make $13-15 million more in quarterly sales than anticipated was enough for investors to boost its market cap by over $2B…
Even before that, the company was extremely expensive relative to its business metrics. It looks like Alteryx investors don’t care much about valuation. In an environment where no price is too high we think a different tool is needed. So instead of using P/E ratios or discounted cash flows, let’s apply the Elliott Wave principle to the chart below.
Alteryx’s 4-hour chart reveals that the current price of over $146 a share is not even the highest ever. In July this year, AYX exceeded $185 a share, but by early-September, the stock was down to less than $105. What interests us is the fact that this 43% slide took the shape of a five-wave impulse.
Labeled 1-2-3-4-5, this pattern means the stock is still in a downtrend. The current revenue guidance-inspired surge is simply the corresponding correction. According to the theory, once a correction is over the larger trend resumes.
The chart above means that today’s rally is most likely just wave B, following an impulse in wave A. If that is the case, more weakness in wave C should be expected once wave B is over. With that in mind, a bearish reversal at the 61.8% Fibonacci level near $155 a share makes sense. Wave C could then drag Alteryx stock down to $100 or lower for a 33+% decline.
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!