Horizon Pharma plc stock fell below $2 a share in March 2013. By July 2015, it was trading close to $39.50. What a ride, indeed. Unfortunately, the pharmaceutical company’s shareholders could not stay on cloud nine very long. Just three months later, in October 2015, Horizon Pharma crashed to $12.86. Currently hovering around the 18-dollar mark, investors are probably wondering if it is time to buy Horizon shares again. Let’s see if the Elliott Wave Principle can help us come up with an answer.
The weekly log chart of the stock shows that the entire uptrend between March 2014 and July 2015 is a five-wave impulse. This means Horizon Pharma’s long term trend is headed north. But the Wave principle states that every impulse is followed by a three-wave correction in the other direction. In our opinion, that is the phase Horizon is trading in now. And it does not seem to be over yet. Instead, we believe the retracement’s third wave – (c) – is about to take the stock back to the price area between $9 and $7, where the support of wave (4) of the impulse is likely to allow the bulls to take the wheel again. If we compare this target zone to current prices, we see that Horizon Pharma might lose at least 50% of its market capitalization from now on. However, instead of losing hope, investors should take advantage of that, because once Horizon Pharma enters the $9-$7 area, the 5-3 wave cycle would be complete and a low-risk buying opportunity would arise.
“Invest at the point of maximum pessimism” -Sir John Templeton