Lockheed Martin has been one of the best companies to own during the last ten years. The Great Recession dragged the stock down to $57.41. Once again, the point of maximum pessimism turned out to be the best time to buy. Two days ago, LMT closed at a new all-time high of $370.38 a share.
In other words, Lockheed is up 549% since 2009, not counting the dividends. With the stock at a record high and the company posting its best business results ever, few seem to be worried about a possible decline. But is investors’ complacency warranted?
Lockheed ‘s weekly chart above reveals the Elliott Wave structure of the entire bull market since 1999. It looks like a textbook five-wave impulse pattern, labeled (1)-(2)-(3)-(4)-(5). The sub-waves of waves (1) and (3) are also clearly visible. It is interesting to note that waves (2) and (4) retraced almost exactly to the 61.8% and 38.2% Fibonacci levels, respectively.
Anyway, what makes this pattern important is its Elliott Wave implications. The theory states that a three-wave correction of the same degree follows every impulse. This means that once wave (5) is over, possibly near the $400 mark, a major bearish reversal can be expected.
The anticipated decline has the potential to drag Lockheed stock back to the support area of wave (4) or even lower. If this analysis is correct, complacency is investors’ worst enemy right now. A bearish reversal can soon occur, followed by a 40-50% drop in the next few years.
Did you like this analysis? 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!