We first wrote about Mondi plc, the paper and packaging company, almost a year ago. On May 5th, 2019, the stock was hovering above 1700 pence per share. Despite being down 25% from its all-time high already, we thought it was too early for investors to buy the dip.
Our pessimism was based not on macro analysis of the industry, nor on micro analysis of the company. Instead, we examined Mondi’s weekly chart from an Elliott Wave perspective. Twelve months ago, it revealed the worst is yet to come. Take a look:
The chart showed a five-wave impulsive rally from the March 2009 bottom to the top in August 2018. The pattern was labeled (1)-(2)-(3)-(4)-(5). The five sub-waves of waves (1) and (3) were also visible.
According to this count, the decline from 2250 pence was supposed to be part of a three-wave correction. Assuming a simple (a)-(b)-(c) zigzag was in progress, we thought that once wave (b) was over, another selloff in wave (c) can be expected. The support area between 1300 and 1200 pence per share looked like a reasonable target. The updated chart below shows how the situation unfolded.
Wave (b) developed as a triangle correction, labeled a-b-c-d-e. It held the price in a tight range for months, but couldn’t do that forever. Wave (c) coincided with the broad coronavirus market selloff. In mid-March 2020, it dragged Mondi stock down to 1156 pence a share.
And just when things looked the bleakest, Mondi stock bounced up. As of this writing, it is trading close to 1450, up 26% from the bottom. If this analysis is correct, the bullish 5-3 wave cycle is complete. The recent recovery must be the beginning of a new uptrend. In the long-term, the bulls should be able to conquer new all-time highs.
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!
