We first covered Horizon Therapeutics, then Horizon Pharma, in September 2016. The stock was trading around $18 a share after a decline from the vicinity of $40. However, we didn’t think it was time to buy. The structure of the preceding rally ending in mid-2015 was impulsive and we thought the bears were not done yet. In fact, we thought HZNP stock can “be cut in half“. The Elliott Wave chart below, published over four years ago, explains why.
A complete impulse pattern, labeled (1)-(2)-(3)-(4)-(5) on Horizon’s weekly log chart, meant a three-wave decline was in progress. Targets below $10 were supposed to be reached in wave (c) before the bulls could return. It took a while, but in May 2017 HZNP fell to $9.45. A bullish reversal then occurred and by our next update in March 2019 the stock had tripled.
Up 200% Was Just the Start for HZNP Stock
At $28 a share, Horizon Pharma had already delivered a ~200% return in less than a year from the bottom. However, when a correction is over, the preceding trend resumes and usually exceeds the previous high/low. So, it made sense to expect more strength until at least $40 a share is taken out. As it turned out, $40 was just the beginning for HZNP bulls.
HZNP blew past $40 in May 2020 and never looked back. Earlier this week, the price exceeded $96.50 for a total gain of 922% from the May 2017 low. That’s great, but the old saying that no trend lasts forever still holds true. Judging from the updated chart above, maybe it is time for the lucky bulls to take some profits off the table.
Horizon’s ten-fold surge in less than four years fits the description of a typical third wave. It is sharp, fast and long enough for us to label it as wave III. This means a notable correction in wave IV is now due. Fourth waves often retrace back to the 38.2% Fibonacci level. Here, this translates into a decline to the $65 – $60 area before the bulls return for one last push in wave V. If this count is correct, HZNP stock can lose a third of market value from current levels.
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!