The coronavirus panic caused indiscriminate selling of almost every stock, regardless of the underlying company’s position. Among the hardest hit blue chip stocks was Walt Disney. The bearish logic behind the 28% selloff is that a big part of Disney’s revenue comes from its movies and parks.
People fearful of infection would rather stay home than go to the cinema or a theme park. Wall Street quickly sensed the danger and hurried to sell. The interesting part is that Elliott Wave analysis put us ahead of the crash. The chart below, published on November 21st 2019, explains how.
Disney’s daily chart revealed a big triangle pattern which took almost three years to fully develop. Triangles precede the final wave of the larger sequence. Here, we thought the triangle was wave IV. The following rally was then supposed to be wave V.
The five sub-waves of wave V were also visible. Every impulse is followed by a correction, so we thought a bearish reversal can be expected once wave (5) of V is over. Three and a half months later, this is how Disney’s updated chart looks like:
Disney reached an all-time high of $153.41 on November 26th, 2019. Last week, it fell to $110.32. And while the exact catalyst – the coronavirus – was totally unpredictable, the decline itself wasn’t. According to the patterns, it was time for a plunge anyway. A plunge, which is set to continue with waves B up and C down remaining.
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!