Shares of BT Group, the London, UK-based communication services provider, have been under bearish jurisdiction since November, 2015, when prices reached $37.70 on the New York Stock Exchange. A year and a half later, investors’s enthusiasm has faded and the stock is currently trading near $20 a share.
Generally, the Elliott Wave Principle is a contrarian analytical method, whose purpose is to help traders and investors identify market tops and bottoms, in order to take advantage of the following market move. Just like BT Group stock stopped rallying in late-2015, it will also not fall forever, especially since the company has been consistently profitable in recent years. So, is it time to turn bullish again? Let’s see if the weekly chart below could help us find out.
The weekly chart of BT Group makes the stock’s entire behavior since the bottom in March, 2009, visible. What immediately grabs the attention of the Elliott Wave analyst is the wave structure of the rally from $4.86 to $37.70, since it forms a textbook five-wave impulse. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. That is what we believe has been going on in the last 18 months. But as the chart shows, the current weakness looks like a single wave, while in order to complete the 5-3 wave cycle, wave II has to evolve into a three-wave pattern. This means BT Group stock is not done falling yet. A relatively small recovery in wave (B) might follow, before wave (C) drags the price lower. If this analysis is correct, it might be too early to pick up BT Group shares.