close icon

Fortinet Is Strong, but The Stock Can Slide 40% Anyway

Fortinet Inc. provides cybersecurity solutions to large and small businesses and enterprises. The company went public on the NASDAQ exchange in late-2009. Great timing, as it allowed it to enjoy the phenomenal post-crisis bull market. In fact, by July 2020, FTNT stock was up 794% since its IPO, easily beating the S&P 500’s return over the same time period.

And that not such a big surprise. The company is profitable, growing and debt-free. But perhaps the stock was starting to look a little bubbly this summer. Yesterday, it closed slightly above $124 a share, down 18% from its $151.95 all-time high. Is this is buying opportunity or the beginning of a larger selloff? The Elliott Wave chart below tilts the odds in favor of the latter.

Fortinet Stock can keep losing ground in Elliott Wave correction

Fortinet ‘s weekly chart above reveals the stock’s entire progress since its 2009 IPO. It can easily be seen as a five-wave impulse pattern, labeled (1)-(2)-(3)-(4)-(5). The five sub-waves of wave (3) are also visible.

Fortinet – A Good Company is Not Always a Good Investment

This pattern can serve as a good example of the guideline of alternation. Wave (2) was a time-consuming sideways retracement, while wave (4) was a sharp selloff. The same way, wave 2 of (3) was deep and much faster than the triangle correction in wave 4 of (3).

If this count is correct, the July 2020 high at $151.95 was likely the end of wave (5). According to the theory, a correction of the same degree, but in the opposite direction follows every impulse. Corrections usually erase all of the preceding impulse’s fifth wave.

In Fortinet ‘s case, this means the stock can slide down to the support of wave (4) near ~$75 a share. From the current level of $124, this translates into a 40% drop. In addition, FTNT trades at an estimated 2021 P/E ratio of 52. In our opinion, even though there is nothing wrong with the company, its high valuation and the above-shown Elliott Wave structure make the stock a risky bet.

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!

Stay informed with our newsletter

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

Privacy policy
You may also like:

GameStop Stock Can Lose 40% Short-Term

GameStop Corp., once the larger video game retailer, has been losing ground in recent years. The switch to e-commerce and direct-to-consumer trends led to a steady decline in GameStop’s sales. The intruduction of cloud-gaming is only adding to the company’s problems. On that backdrop, it is not surprising that the stock has been in a…

Read More »

Tesla: Elliott Wave Aside, This is Totally Irrational

Tesla is up over 13% in pre-market trading today after news of its scheduled inclusion in the S&P 500 index on December 21st. The stock’s phenomenal rise since the COVID-19 crash led the company to a market cap of over $400 billion. This makes it much bigger than established rivals such as Volkswagen, Toyota and…

Read More »

Biogen, Elliott Wave and the Quest for Alzheimer Cure

Biogen is one of the top-notch firms in the biotech space. With sales of over $12.7B in 2019, the stock has been very generous to investors in the past. In fact, it is one of only five companies mentioned in Christopher W. Mayer’s book “100-Baggers” that have returned 100 to 1 in under six years.…

Read More »

Ryanair Stock, Unlike Its Planes, Can Fly Again Soon

Few industries have been hit harder by the COVID-19 pandemic restrictions than the airlines. Flight numbers and passenger traffic have been significantly reduced in Europe and the U.S. since March. Even low-cost carriers like Ryanair were not spared. Ryanair’s passenger traffic plunged by 99.5% in May and is still down 64% in September. Apparently nobody…

Read More »

General Mills Bearish Elliott Wave Cycle Spells Trouble

The last time we wrote about General Mills stock was over a year and a half ago. Following a bullish reversal Elliott Wave analysis helped us correctly predict in late-December 2018, the stock was trading above $51 a share in late-March 2019. It was a 33% recovery, whose structure, however, didn’t look quite as anticipated.…

Read More »

NIU Stock, Down 18% This Week, Can Fall Further

E-scooters have been all the rage in the past couple of years. Much friendlier to the environment and often more convenient as an urban transportation option than cars, electric scooters were quick to gain popularity. Niu Technologies, a Chinese manufacturer, has been bearing the fruits of this trend. The company’s ADS trade on the NASDAQ…

Read More »

Barry Callebaut Can Drop 25% as Fourth Wave Unfolds

Barry Callebaut AG is one of the largest cocoa processors and chocolate manufacturers in the world. Formed by the 1996 merger of Callebaut and Cacao Barry, the company produces over two million tonnes of cocoa and chocolate per year. Barry Callebaut went public on the SIX Swiss Exchange in 1998 and has been quite rewarding to investors ever since.…

Read More »

More analyses