Formed by the merger of Avery International and Dennison Manufacturing in 1990, Avery Dennison manufactures and distributes pressure-sensitive adhesive materials, apparel branding labels and tags, RFID inlays, and specialty medical products. The company’s market cap is close to $18B and the stock is not far from the all-time high of $233 and change it reached last month.
The share price is up nearly 1200% or 13-fold from its 2009 bottom, making Avery Dennison a market-beating investment over the past 15 years. The higher its valuation, however, the harder it is for the strong returns to continue. Given the stock’s forward P/E of 23 and the company’s low-single-digit revenue growth rate, we think that caution is advised. And the Elliott Wave chart below more than supports that conclusion.
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!
The weekly chart of Avery Dennison reveals that the bull market from the bottom in 2009 can be seen as a complete five-wave impulse. We’ve labeled the pattern (1)-(2)-(3)-(4)-(5), where the five sub-waves of (1) are also visible and wave (4) is an a-b-c-d-e triangle correction. It looks like wave 5 of (5) could lift the stock to a new high near $240 – $250 a share.
That might be the bulls last chance to evacuate, though, because according to the theory, a three-wave correction follows every impulse. Furthermore, the corrective phase of the Elliott Wave cycle usually erases the entire fifth wave and then some. This puts downside targets near $140 within the bears’ reach. So we think that extrapolating the recent past into the distant future would be a mistake for Avery Dennison shareholders. The company’s long-term prospects remain bright, but the next couple of years are likely to disappoint.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 twice a week! Check them out now!
