Almost two years ago, on September 12th 2016, we published an article about a little known oil refiner, whose stock price had plummeted by over 82% in just over three years. The company’s name was CVR Energy Inc. and its crash of course coincided with the great selloff in crude oil prices. And while others were running as far away as possible from everything oil-related, we decided to take a look at CVR Energy’s stock chart and see what that plunge meant in the context of the Elliott Wave Principle. Here is what we found.
CVI‘s decline from $72.32 in May 2013 actually preceded an even bigger five-wave impulse to the upside from as low as $2.15 in October 2008. According to the theory, every impulse is followed by a three-wave correction in the opposite direction and that is exactly what the post-2013 selloff was. It looked like a simple (a)-(b)-(c) zigzag correction with a running flat in the position of wave (b). Once a correction is over, the larger trend resumes in the direction of the impulsive sequence. Hence, we thought that instead of joining the bears, it was time to be contrarian. The updated chart below shows what has been going on since September 2016.
By mid-May 2018, CVR Energy stock was trading in the vicinity of $48 a share, up 296% from the low at $12.03 on November 3rd, 2016. Sometimes patience and discipline is all you need to multiply your money four. Nevertheless, the bulls could not maintain the positive momentum. As a result, the stock is currently hovering around $37.50 a share. The good news is this decline seems to be just another pullback, since the recovery from $12.03 to $47.67 has a five-wave structure, as well.
If this count is correct, wave (2) should drag the price down to the support area of wave 4 of (1) near $28 per share before the uptrend resumes. The global oil glut is now resolved and OPEC, Russia and the United States are already struggling to prevent a deficit. CVR Energy is well positioned to benefit in this “back-to-normal” environment in the long term.
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