AMN Healthcare Services provides workforce and staffing solutions to healthcare facilities in the U.S. The company is relatively small with a market capitalization of less than $4 billion. However, small companies can make for excellent returns if one happens to identify the winners.
And indeed, between late-2011 and early-2020, AMN stock from under $4 to over $89 a share for a total gain of more than 2100%. Such a phenomenal return in less than a decade is enough to put many of the big tech stocks to shame.
However, the COVID-19 crisis hit AMN Healthcare stock hard, dragging it down to sub-$37 by May, 2020. Fortunately, just as the stock fell more than the benchmarks in Q2 of 2020, it rose more afterwards. Earlier this week, the price exceeded $74. But how long can this recovery last?
The chart above puts AMN ‘s journey from its 2011 low in Elliott Wave context. It shows that the uptrend to $89.22 is a five-wave impulse pattern. It is labeled (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave (1) are also visible. This, in turn, means the plunge to $36.65 must be part of the three-wave correction, which, according to the theory, follows every impulse.
COVID Selloff 2.0 Lurking Ahead for AMN Healthcare Stock
“Three-wave” is the keyword here, because it seems that AMN ‘s correction did not end in May 2020, but is still in progress. The initial sharp selloff, which erased 59% of the company’s market value, is labeled as wave (a). The current rally to $74.11 so far must then be wave (b). It follows that another notable decline can be expected in wave (c), before the bulls can really return.
Since wave (c) is supposed to breach the bottom of wave (a), targets below $36 a share make sense. If this analysis is correct, AMN Healthcare investors should brace for another ~50% drop. In fact, the price seems to be at a place very similar to where SEI Investments stock was in late-2019. When we wrote about it in November 2019, its wave (b) was almost over. Shortly after, wave (c) brought a 50% collapse from $70 to $35…
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!