McDonald’s’ recent 13-dollar sell-off caught many investors unprepared. If you are one of them, you may benefit from reading this.
“So, the Elliott Wave cycle 5-3 is complete and another rally is highly probable.” This is an excerpt from our first stocks analysis, posted on 2nd March 2014. The analyzed stock was McDonald’s Corp. On the chart below you can see how the situation looked like, when that article was published.
As you can see, we were bullish on McDonalds, which, in terms of the Elliott Wave Principle, means that the minimum target for the expected upside move was above the previous top, left by wave 5 of the impulsive rally. Now, more than half a year later, we will show you what has happened with this forecast. The next chart illustrates the present condition of McDonalds stock prices.
The chart shows, that soon after our article, prices began rising and on 14th May, the new top has been reached, thus fulfilling the minimum target expectations. However, this rally did not have the necessary five waves. It consists of only three, labeled a-b-c in red. Then came the sharp five-wave decline from 103.70 to 90.50. If we take a look at the whole price action on the daily chart, we will see a clear impulsive rise from 83.28 to 103.63, followed by a corrective pattern, that includes three waves A-B-C, with a 3-3-5 wave structure and a new top in wave B – the expanding flat. Furthermore, pay attention to the level, where wave C seems to have found support – the 61.8% Fibonacci level.
With a very nice 5-3 Elliott Wave cycle and the Fibonacci retracement, we have enough reasons to expect the resumption of the larger uptrend, which, if this is the correct count, should lead prices above 103.70 once again.