Netflix Inc. stock climbed to its all-time high of 133.27 in December, but could not maintain the bullish momentum, which led to a sharp sell-off back to 79.95 in the beginning of February. So, Netflix lost more than $53 per share in less than two months. Should we consider the stock to be in a bear market now? The Elliott Wave Principle suggests we should not give up on it yet.
According to the theory, trends move in repetitive patterns, called waves. There are two types of waves – impulsive and corrective. Impulses consist of five sub-waves and show the direction of the larger trend, while corrective waves move against it. Now, take a look at the above-shown chart. It appears that the last major top in December, 2015, was the end of wave (3) of a multi-year impulse to the north. Then, the current plunge is supposed to be wave (4), which means wave (5) should be expected to take the price to new all-time highs. If this is the correct wave count, Netflix Inc. stock is providing a great “buy the dip” investment opportunity right now.
