Bristol-Myers Squibb and Celgene are expected to merge into a single company before the end of the year. The deal will create the fifth largest pharmaceutical company in the world with sales of approximately $42 billion in 2019.
Bristol-Myers fell sharply after the deal was announced in early-January. In late-April, the stock was still in the doldrums and it seemed like the market does not approve the Celgene deal. But a quick Elliott Wave analysis of BMY’s daily chart revealed a different picture. We shared it with our readers on April 26th.
Bristol-Myers was hovering below $46 a share, down from $77 in 2016. However, the structure of this decline looked like an A-B-C flat correction. Waves A and B were simple a-b-c zigzags, while wave C was shaping up as an ending diagonal pattern.
According to the theory, once a correction is over the larger trend resumes. Since Bristol-Myers was clearly in an uptrend prior to July 2016, we thought “it makes sense to expect a bullish reversal” once wave 5 of C is over. As of this writing, the BMY-CELG deal is still pending, but the market seems to be much more optimistic about it.
Wave 5 fell to $42.48 in July to complete the ending diagonal in wave C. Yesterday, the stock closed at $58.51 for a total gain of 37.7% in less than four months. With the bullish reversal already in place we can confirm Bristol-Myers’ uptrend has resumed. Of course, it won’t move in a straight line, but as long as the $42.48 bottom holds investors can feel confident buying the dips.
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!