BeiGene develops and commercializes oncology medicines globally. Like most other biotechnology companies, BGNE is not profitable. The stock’s value derives mainly from the market’s perception of the potential of the company’s treatments. And when it comes to perceptions, emotions play a big role. This makes BeiGene stock interesting from an Elliott Wave point of view.
It is precisely the emotional phases market participants go through that produce repetitive Elliott Wave patterns. Knowledge of how the complete wave cycle should look like gives this method of analysis predictive value. In BeiGene ‘s case, it seems the corrective phase of the cycle is still in progress.
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BeiGene went public in early-2016. Despite the numerous pullbacks, the stock had been in an uptrend until September, 2021, when it hit $426.56. Less than two years later now, it sits 44% lower at $238.64. What grabbed our attention was the fact that the post-IPO rally is a textbook five-wave impulse. The pattern is marked I-II-III-IV-V.
BeiGene Stock Can Lose Another 50% to 60%
Wave II is a (w)-(x)-(y) corrective combination between a simple a-b-c zigzag in wave (w) and a triangle in wave (y). The five sub-waves of wave III as well as the five sub-waves of wave (3) of III are also visible. Wave IV was a simple (a)-(b)-(c) zigzag. The surge from under $239 to over $426 must then be the fifth and final wave.
The theory states that a three-wave correction follows every impulse. And indeed, soon after it reached a new record in wave V, the stock started crashing. By May, 2022, the share price was down 72.3% to $118.18. This selloff happened despite Amgen’s strong vote of confidence and acquisition of a 20.5% stake in BeiGene.
The problem is that the decline to just over $118 is also impulsive and labeled (1)-(2)-(3)-(4)-(5). Therefore, we believe it was just wave A of a larger A-B-C zigzag correction still in progress. The recovery to $280.62 last month looks like another (a)-(b)-(c) retracement in wave B. If this count is correct, wave C can be expected to drag BeiGene stock below the bottom of wave A. This makes a drop to roughly $100 a share very likely. From the current level of $239, that would be a 50% to 60% plunge.
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