Similarly to the Dow Jones Industrial and the S&P 500, the Amsterdam stock exchange index, or AEX, has been in a uptrend since the end of the Financial crisis. Its journey to the north started from 195 in March 2009 and went on to almost 577 in July 2018. As of this writing, the Dutch benchmark trades at 510, down 11.6% from the top three months ago.
Generally, experienced stock market investors like to buy on such dips and hold for the long term. Unfortunately, the truth is the Amsterdam stock exchange index has not been very rewarding to those practicing the buy-and-hold strategy. In contrast to its American alternatives, the Dutch blue chip index currently stands at the same level it traded 20 years ago. It is still 200 points below its all-time high of 703 registered in September 2000.
AEX – What is the Elliott Wave Principle Saying
So, is the current drop an opportunity to take advantage of or a danger to stay away from? Let’s see if the chart below can help us find out.
The weekly chart of the Amsterdam stock exchange index allows us to take a look at the post-2009 recovery through the prism of the Elliott Wave Principle. Unfortunately for the bulls, it looks like a complete five-wave impulse pattern, labeled I-II-III-IV-V. The sub-waves of III and V are also clearly visible.
The theory states that every impulse is followed by a correction of three waves in the other direction. The first signs of weakness occurred when wave V failed to reach the upper line of the trend channel drawn through the highs of waves I and III. In addition, there is a bearish MACD divergence between waves III and V.
All this tells us the drop from 577 is probably not over yet. The anticipated A-B-C decline has the potential to drag the Amsterdam stock exchange index down to the support area of wave IV. In terms of price, 400 looks like a reasonable bearish target, implying roughly 20% downside from here. This does not look like an attractive buy-the-dip proposition. At least not yet.
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