SS&C Technologies Holdings Inc. is a software solutions developer for the financial services and healthcare industries. The company is decently profitable and still growing, albeit slowly. The stock trades at an adjusted forward P/E below 13, which makes it look somewhat undervalued, as well. SSNC underperformed the S&P 500 last year, but is beating the average so far in 2023.
Can the recent outperformance continue and is SSNC a good bet now at ~$60 a share? The company’s business performance has been a lot less volatile than the stock price, so fundamental analysis is hardly the answer. Elliott Wave analysis, on the other hand, seems to be giving us a clue already.
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The 4-hour chart of SSNC stock reveals that the 2022 plunge from $85 to $45 is a textbook five-wave impulse. We’ve labeled the pattern 1-2-3-4-5, where the five sub-waves of waves 3 and 5 are visible, as well, and marked i-ii-iii-iv-v. Impulses point in the direction of the larger trend. So it makes sense to expect more weakness going forward.
However, the theory states that a three-wave correction in the other direction must first occur. And indeed, the end of wave 5 was followed by a notable recovery up to $64.52 per share. The retracement could’ve ended right there and then, but it looks like the bulls weren’t done yet. Wave B seems to be evolving into a w-x-y double zigzag.
If this count is correct, wave ‘y’ of B is likely to reach the 61.8% Fibonacci resistance level. At that point, the 5-3 Elliott Wave cycle would be complete and it would be time for another major decline in wave C. In other words, a bearish reversal can be expected to take place near the $70 mark. Wave C should then drag SSNC stock below the bottom of wave A at $45.25.
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