Exchanges don’t exist in a vacuum. There are companies whose entire operation is dedicated to running them. We recently wrote about CBOE Global Markets – the company operating, among others, the Chicago options exchange. Today, we would like to examine another major company in the field – Intercontinental Exchange Inc. – the company owning the NYSE.
Although the NYSE traces its roots back to 1792, the company that currently owns it was formed in 2000. Intercontinental Exchange Inc. became a public company in late-2005. Apart from the sharp declines in 2008-9 and 2020, the stock has been a very good performer. Currently around $115 a share, it is up 1374% since its IPO.
ICE, however, despite its strong fundamentals, is far from a fast-growth company. Its net profit has been hovering around $2B for the past three years now. Yet, the stock trades at a P/E higher than 30, which makes it quite expensive. That is not a problem until it is. No trend lasts forever and chasing the stock price as it keeps climbing will not work forever, either. Based on the Elliott Wave chart below, it can stop working sooner than some seem to think.
The weekly chart above shows that the stock of the NYSE ‘s parent company has drawn a complete impulse. The pattern is labeled I-through-V, where wave II marks the 2008-9 Financial Crisis and wave IV stands for last year’s coronavirus selloff.
What the bulls should worry about, besides the expensive valuation, is that a three-wave correction follows every impulse. Furthermore, the negative phase of the Elliott Wave cycle usually erases the entire fifth wave. So, if this count is correct, we can expect a decline back to the support of wave IV near $60 a share. Given that ICE just exceeded $121 in April, this could be a ~50% plunge.
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!