MasterCard Inc. has been a wonder to behold ever since its IPO in 2006. The only disappointing period the stock had was during the 2008 stock market crash, when prices fell to slightly above $11. However, MasterCard managed to recover quickly and is currently soaring above the $90 mark. Is there anything investors should worry about? Could 2008 happen again? To answer that, we need to see how 9 years of public trading look like through the prism of the Elliott Wave Principle.
The Wave Principle is a technical method of market forecasting, postulating that stock market trends move in five-wave sequences, called impulses. This means, that each stock is at some phase of a larger impulse at any given moment. Judging from the above-shown chart, Mastercard is about to finish its wave (3) soon. So, if we follow the pattern, we should expect wave (4) to the downside. The 2008 stock market crash is labeled as wave (2). Wave (4) is supposed to be a correction of similar degree. In 2008, Mastercard lost more than $20, declining from $32 to roughly $11. As a guideline, fourth waves usually end in the territory of previous fourth waves. Here, wave (4) could be expected to revisit the price area of $70, where wave 4 of (3) ended. In conclusion, just like it did in 2008, we believe MasterCard could lose some $20 again, before wave (5) resurrects it.
