Headquartered in Luxembourg, Allegro.eu S.A., not to be mistaken with America’s Allegro MicroSystems, is the biggest Europe-native e-commerce platform. The company has a 40% market share in Poland and is currently in the process of expanding to Czechia, Slovakia and Hungary. At 38.5 zlotys per share, the stock has more than doubled from its 2022 low, but is still down substantially from its post-IPO record of 99 zl/shr. The question is, can investors expect the recent recovery to continue? The Elliott Wave chart below leans on the affirmative.
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The first thing we see, however, is that the recovery from 18 zlotys per share in 2022 is a total mess. It is a sideways movement, consisting of many three-wave structures and overlaps in both directions. It is best seen as an expanding leading diagonal, marked I-II-III-IV-V in wave (I), followed by what we call a confusing type of expanding flat correction, labeled A-B-C in wave (II).
In every flat correction, waves A and B are corrective, while wave C is a five-wave impulse or an ending diagonal. The confusion here comes from the fact that instead of simple three-wave structure, wave B is an (a)-(b)-(c)-(d)-(e) triangle. To further complicate things, wave (a) of that triangle is much bigger than the others and includes a triangle itself in wave b). Wave C was a clear impulse pattern, labeled (1)-(2)-(3)-(4)-(5), down to the 61.8% Fibonacci support level.
Such complex patterns carry a significant risk of mislabeling and mistakes. As a general rule, we don’t put too much trust in them and refuse to participate when we see one. Caution is preferable, which often means doubting our own opinions. Lasting success in trading and investing comes from picking your battles and waiting for a clear setup, not from shooting at everything that moves. We added Allegro.eu to our stock portfolio at 29 zl/shr in February this year, because of its strong fundamentals and undervaluation.
Now that the subsequent recovery has greatly improved the chance that this Elliott Wave setup is correct, we think it only supports the fundamental positive outlook. This is how, instead of pitting technical and fundamental methods against each other, we combine them to strengthen our case. It is a beautiful symbiosis.
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