Eight months ago, on march 7th, we published “MasterCard To Recall Memories Of 2008?”, saying the stock “could be expected to revisit the price area of $70”. We thought so, because the Elliott Wave Principle, the only method we use for our analyses, was suggesting MasterCard is ready for its wave (4) to the south on the weekly chart. It is given below.
Following the Wave Principle’s logic, that price trends move in five-wave sequences, called impulses, we assumed MasterCard’s is simply not finished yet. Its waves (4) and (5) were still missing. That is why we anticipated a decline, followed by an even larger recovery. The next chart shows how MasterCard has been developing since that forecast.
Well, the stock kept climbing for a while, only to form an ending diagonal reversal pattern for wave 5(orange) of 5(black) of (3). Soon after it was over, the bears returned with a bang. MasterCard stock plunged from $99.14 to $74.53 in wave (4). And, on the “Black Monday”, just when almost everyone was panically selling, prices started rising in wave (5), just as expected.
The trouble now is that every five-wave impulse is followed by a same degree three-wave correction in the opposite direction. In other words, MasterCard seems to be in great danger, since its uptrend might come to an end any minute now. If this is the correct count, the bears could take the stock back to $70 or even lower. In our opinion, this is not the time to invest in MasterCard.
