Do you consider investing in the stock market? There are some well-performing American stocks in recent years. Illumina Inc. is definitely one of them. However, you might want to think twice, before putting your money in it. This article explains why.
In October 2011, Illumina fell below $28 per share. Less than three and a half years later, in January 2015, it climbed above $213. Such an explosive rally could easily convince you Illumina is a good choice. But, as Warren Buffett says, the investor of today does not profit from yesterday’s growth. So, is yesterday’s growth going to continue tomorrow? The Elliott Wave Principle, a technical forecasting method, focused on collective market psychology, suggests otherwise.
As visible on the chart, the advance from $28 to $213 takes the shape of a five-wave impulse with an ending diagonal in wave 5. The theory postulates, that every impulse is followed by a three-wave retracement. But this is not the only reason to be preparing for weakness. The Relative Strength Index indicator supports the negative outlook with a bearish divergence between waves 3 and 5. If this analysis is correct, Illumina is going to be far from well-performing in the next couple of years. Do you still think it is a good investment choice?
