With a market cap of just $7.5B, Huntington Ingalls is hardly the main focus of financial media outlets. Its mid-single digit revenue growth rate is far from impressive, either. But the company is a force to be reckoned with for another reason. It is the United States’ largest military shipbuilder, manufacturing nuclear aircraft carriers, nuclear submarines and amphibious warships, among others, for the U.S. Navy.
The company isn’t immune to the vagaries of the stock market, however. Huntington Ingalls stock fell 26% in one day on October 31st after issuing disappointing full-year revenue guidance. The share price has yet to recover from that crash and is still down 36% from its all-time record high of $300, reached in March.
Given HII’s indispensable position in US defense and security, investors probably shouldn’t worry too much about the company’s financial survival. Can they expect a recovery in the stock price soon, though? The Elliott Wave chart below could help us answer that question.
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!
In isolation, the October collapse doesn’t tell us much about Huntington Ingalls stock’s future. It dragged the company’s P/E ratio to just 13, but cheap stocks can remain cheap for a long time. Seeing this crash in the context of HII’s entire history as a public company, however, gives us an idea of what to expect. The chart above reveals a five-wave impulse from $22.62 in 2011 up to nearly $280 in 2020.
We’ve labeled the pattern (1)-(2)-(3)-(4)-(5), where two lower degrees of the trend are visible within the structure of wave (3). Wave (4) was an a-b-c-d-e triangle correction. According to the theory, every impulse is followed by a three-wave retracement. And indeed, Huntington Ingalls stock fell more than 50% in 2020 during an a-b-c zigzag correction down to $136 a share.
Unfortunately for the bulls, the following recovery to $300 was also limited to a three-wave structure. It was another a-b-c zigzag, where wave ‘b’ was a triangle. This tells us that the corrective phase of the cycle is still in progress as a flat correction, marked (a)-(b)-(c), whose wave (c) is currently under construction. It is supposed to evolve into five-wave impulse and the October selloff fits perfectly in the position of its third wave.
Whether wave (c) is going to breach the bottom of wave (a) is an open question, but even if it doesn’t, we can still expect more weakness before the bottom is in. Chances are that we’re going to see a drop below $160, before the preceding uptrend in Huntington Ingalls stock can resume.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!
