Barry Callebaut AG is one of the largest cocoa processors and chocolate manufacturers in the world. Formed by the 1996 merger of Callebaut and Cacao Barry, the company produces over two million tonnes of cocoa and chocolate per year.
Barry Callebaut went public on the SIX Swiss Exchange in 1998 and has been quite rewarding to investors ever since. Over the 18 years since October 2002, the stock is up nearly twenty-fold, climbing from a low of CHF 108 to CHF 2022 as of this writing.
Earlier this year, the COVID-19 market crash caused a sharp plunge that erased over 27% of the company’s market value. Fortunately for the bulls, most of it has now been recovered as the stock currently trades above the CHF 2000 mark. Now let’s take a look at Barry Callebaut from an Elliott Wave perspective.
The weekly chart above reveals the stock’s entire progress since its IPO. The price’s path reminds us of an incomplete five-wave impulse. Wave (1) ended at CHF 1078 in 2007. It was followed by a large decline in wave (2) down to the 61.8% Fibonacci level. Wave (3) then traveled from CHF 410 in 2008 to the all-time high of CHF 2240 in 2020. The five sub-waves of wave (3) can also be labeled 1-2-3-4-5.
Barry Callebaut to Lose A Quarter of its Value Over the Next Few Months
This means the initial COVID-19 drop must be part of wave (4). Once it is over, the bulls should return and lift the stock to a new record in wave (5). The problem is that wave (4) is too small compared to wave (2). Furthermore, its wave ‘c’ appears to be missing.
If this count is correct, we can expect another selloff in Barry Callebaut to drag the stock to roughly CHF 1500. In that area, the bears would likely have to give up. They will be facing a support cluster, formed by the lower line of the trend channel, the 38.2% Fibonacci level and the support of wave 4 of (3).
The fact that the stock currently trades at a forward P/E of 35 further reinforces the short-term negative outlook. Barry Callebaut investors can brace for a 25% drop from current levels before the bulls return.
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!