close icon

Ferrari Stock to Hit the Brakes Soon?

Ferrari is capable of incredible speeds and not just their cars. Ferrari N.V. held is NYSE initial public offering in October 2015 and after a decline to $31.66 per share in February 2016, the stock began an incredible rally. Two years later, the bulls reached a high of $130.63 for a 312% total gain, which translates into a compounded rate of return of 103.1% per year. In other words, Ferrari stock easily beat all major benchmark indices money managers compare their performance to. Does this mean it is time to add it to your portfolio?

ferrari stock elliott wave analysis

The daily chart of Ferrari stock above shows its entire 2-year rally from the lows in February 2016. It is very impressive, indeed. Unfortunately, it looks like a textbook five-wave impulse pattern, whose wave 3 is extremely extended, which helps us see its sub-waves, as well. The problem is that according to the Elliott Wave Principle, a technical analysis method we use to stay ahead of market reversals, every impulse is followed by a correction of three waves in the opposite direction. In Ferrari stock’s case this means that instead of joining the bulls near $124 a share now, investors should proceed with great caution.

In addition to the wave count, the relative strength index shows a typical bearish divergence between waves 5 and 3, which is another reason not to buy Ferrari stock at current levels. The anticipated three-wave correction needs to retrace a respectable part of the preceding rally. If this count is correct, a decline to the $80 mark is very likely from now on, despite the company’s record-breaking business results in 2017.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Elliott Wave Ahead of MCO Stock Bullish Reversal

A month and a half ago, Moody’s was trading below $137 a share, following a decline from as high as $188 in late-July, 2018. MCO stock was down by 27% in just five months and investors were getting overly pessimistic about its investment merits. But instead of simply extrapolating the recent weakness into the future,…

Read More »

Procter & Gamble Stock Approaching Heavy Resistance

The lower the price paid the higher the return. This is a simple truth all stock market investors should keep in mind all the time. Yet, few really do. Procter & Gamble, for example, is the same strong company it was last year and the year before. Depending on the price you paid for its…

Read More »

Ralph Lauren Stock Set for a 50% Gain?

Ralph Lauren, the maker of Polo, is another top apparel brand, which was left for dead during the “retail apocalypse” of 2017. In just four years between May 2013 and May 2017, the company lost over 65% in market value as the stock fell from an all-time high of $192 to as low as $66.…

Read More »

Etsy Stock: The Easy Money’s Been Made Already

Three years ago, in January 2016, Etsy stock fell to as low as $6.04 a share. Yesterday, it closed at $54.59 a share. If you have been among the lucky few, who happened to pick the bottom and held until now, your annual compounded rate of return would be over 108% per year or 803%…

Read More »

Bank of America Riding the Earnings Wave… For Now.

The last time we wrote about Bank of America was on October 18th, 2018. The stock was trading below $29 a share, down from the $33.05 top reached in March. The bank had just reported a record first quarter, but the stock price was falling nevertheless. So in order to make sense of it, we…

Read More »

Boeing Stock Ready for a Final Ascent

The last time we wrote about Boeing stock was in early October 2018. In that article we shared our view that while BA was approaching the $400 a share mark, it was time for the bulls to play it safe. The Elliott Wave principle suggested that a bearish reversal can soon be expected, even if…

Read More »

Home Capital: From near Bankruptcy to Opportunity

Home Capital Survived in 2017 Home Capital investors had a volatile two years. The company almost went bankrupt in mid-2017. Allegations from the Ontario Securities Commission that management misled investors about mortgage fraud within its broker network led to a run on the bank. 95% of its saving accounts deposits disappeared as a result. On…

Read More »

More analyses