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Mondi Group: Little Known Firm, Well Known Pattern

Even Mondi Group themselves acknowledge that not too many people have heard their name. “Our name may not be familiar to the public, but our products are” is written on the second page of the company’s 2018 annual report.

Mondi, listed on the London Stock Exchange, is a global paper and packaging company, headquartered in the United Kingdom. It has a market cap of roughly $8.2 billion, down from the $10.9 billion valuation reached in August 2018.

And while the company may be little known, the Elliott Wave pattern visible on its weekly chart is quite famous. It also helps explain the recent 24% drop in the stock price.

Mondi stock draws a textbook Elliott Wave pattern

Mondi stock fell to as low as 118 pence per share in March 2009. In August 2018 it reached 2250 for a total return of over 1800% in less than 10 years. From an analyst’s point of view, the structure of this impressive rally is even more important than its size.

The stock price drew a textbook five-wave impulse pattern on its way up, labeled (1)-(2)-(3)-(4)-(5). Wave (1) is the extended one, but wave (3) is still longer than wave (5), so there is no violation of the Elliott Wave rules. The sub-waves of waves (1), (3) and even wave 3 of (1) are clearly visible, as well.

Mondi Stock Remains Vulnerable

Unfortunately for the bulls, the theory states that a three-wave correction follows every impulse. That is what we believe has been in progress since the August 2018 top. The selloff from 2250 to 1558 fits into the position of wave (a) of a simple (a)-(b)-(c) zigzag retracement, which is still in progress. If this count is correct, we can soon expect a small recovery in wave “c” of (b), followed by another decline in wave (c) towards the 1300 – 1200 support area.

Mondi has been able to post very strong business results in recent years. However, in the highly cyclical basic materials sector the company competes in strong results are rarely sustainable for very long. The Elliott Wave principle suggests the stock can still lose another ~25% before things start to improve for shareholders.

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!

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