Accenture plc is the global leader in professional services. It partners with more than 3/4 of the companies in the Fortune 500 and serves 92 of the top 100. Through its five segments – Strategy, Consulting, Digital, Technology and Operations – Accenture covers the whole spectrum of business services expertise.
However, despite its leading position, Accenture is not immune to the whims of the business cycle. Businesses tend to cut their expenses in a recession, leading to lower revenues for companies like Accenture which rely on business spending.
With Accenture stock near all-time highs and a recession seemingly on the horizon, can ACN decline from here? If yes, by how much? Let’s apply the Elliott Wave principle to the chart below and see if it can help us answer there two important questions.
The weekly chart of ACN shows the stock entire uptrend from $11.30 in October 2002. Seventeen years later, the price is hovering above $193 a share for a total gain of 1608%, not counting the dividends. While a good visualization of Accenture’s impressive performance for almost two decades, this charts reveals one more thing.
Accenture Stock Not as Strong as the Company
The rally from $11.30 to $202.80 so far looks like a textbook five-wave impulse pattern. It is labeled I-II-III-IV-V with an extended third wave, a flat correction in wave II and a sharp zig-zag in wave IV. Unfortunately for the bulls, the Elliott Wave theory states that a three-wave correction follows every impulse.
If this count is correct, Accenture can soon plunge into a correction. The bears can be expected to pierce the support area of wave IV. This implies a decline to roughly $120 a share before the bulls can return. The RSI indicator reinforces the negative outlook. It shows a strong bearish divergence between waves III and V.
Accenture is a great business and we doubt that the anticipated decline in the stock is going to change that. However, we think investors joining the bulls near $200 a share are putting 40% of their capital at an unnecessary risk.
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