Humana (NYSE:HUM) climbed to an all-time high of $356 in early November 2018, following a rally from as low as $18.57 in March 2009. In less than ten years, the company rewarded the patience of its investors with a total return of over 1820%, not counting dividends.
Unfortunately, the last six months were nothing like the past ten years. In mid-April, Humana dived below $223, down over 37% from its peak. Now, if this is the start of a bigger selloff, then it is time to stay aside. But could it actually be a buy-the-dip opportunity?
The weekly chart above allows us to put Humana’s entire progress since the year 2000 into Elliott Wave context. The Financial Crisis of 2008-2009 is labeled as wave II. The phenomenal uptrend to $356 is a textbook five-wave impulse in wave III.
Humana Bulls Aiming at $400 a Share Before Giving Up
This brings us to the present and the recent pullback, which fits in the position of wave IV. It has already touched the 38.2% Fibonacci level, where fourth waves often terminate. The missing piece of the puzzle is wave V. Provided it’s not a truncation, the fifth wave is supposed to exceed the top of wave III. In terms of price, wave V’s initial targets lie near $360 a share, but $400 is quite reasonable as well.
On the other hand, the bulls should tread very carefully. According to the theory, a three-wave correction in the opposite direction follows every impulse. Investors hoping that the 2019 dip is going to fuel a rally similar to the one that followed the dip in 2009 are up for a disappointment.
If this count is correct, Humana is still in an uptrend and aiming at a new all-time high. However, a bearish reversal near the $400 mark can open the door for a ~50% plunge towards the support near $200 a share.
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