It’s been almost five years since BMW stock hit an all-time high of 123.75 euro a share. Five years for investors to wonder why they didn’t sell earlier. As of this writing, the stock trades near 75.40, down 39% from the March 2015 record.
On the bright side, the stock trades near 75.40, up 29.9% from the August 2019 bottom at 58.04. So depending on where you bought, you either have a big loss or a nice profit to show for it. But that doesn’t answer the most important question: is BMW stock a good bet at the current price?
BMW’s 4-hour chart seems to be giving us a hint already. It reveals that the recovery from 58.04 to 77.06 so far is a textbook five-wave impulse. The pattern is labeled 1-2-3-4-5, where the sub-waves of wave 1 are also visible. From an Elliott Wave standpoint, unfortunately, this pattern means a three-wave correction can now be expected.
If this count is correct, we should prepare for a decline to the support area near 68 euro a share. The RSI indicator reinforces the short-term negative outlook by showing a bearish divergence between waves 3 and 5. In fact, even after this pullback we will be wary of buying.
BMW’s Financials Don’t Look Good Either
Despite its luxurious image, BMW is competing in a very capital-intensive industry. As a result, the company generates negative free cash flow every year, forcing it to take on mountains of debt to cover the deficits. At the end of September, BMW’s long-term debt stood at almost 74 billion euro. When both the fundamentals and Elliott Wave analysis suggest the bet isn’t worth it, we listen.
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!