Universal Display (NASDAQ:OLED) stock is hot again. The share price is up by over 90% in less than two months, climbing from under $79 to above $151 since January 3rd. But is the bulls’ optimism warranted?
Six months ago, on August 15th 2018, we examined OLED stock through the prism of the Elliott Wave principle. The chart below, which was included in that analysis, shows what we found.
The 4-hour chart of Universal Display Corp. revealed that the selloff from $209 to $78.75 has the structure of a textbook five-wave impulse. According to the Elliott Wave theory, this meant two things: first, that a three-wave recovery can be expected; and second, that another notable plunge should then follow.
There has been plenty of news about Universal Display in the past six months. The company missed estimates in its Q3 report, got downgraded by several investment analysts, beat the estimates in its Q4 report and was consequently upgraded by several investment analysts. The updated chart below visualizes OLED stock’s progress during that time.
Six months later now, a complete A-B-C correction is already visible on the 4-hour chart of OLED stock. Despite all the positive and negative news around Universal Display, the stock has been following the Elliott Wave path quite closely.
OLED Stock – Roadblock Ahead
If this count is correct, the 5-3 wave cycle from $209 is almost complete. The sharp surge in the last two months fits in the position of wave C of (B), approaching the 61.8% Fibonacci resistance level near $160 a share. A bearish reversal for the start of wave (C) down can be anticipated in that area.
Given that wave (C)’s natural targets lie beneath the bottom of wave (A), we think OLED stock can lose over 50% from current levels during the rest of 2019. The same kind of pattern inflicted a lot of pain on Nordstrom shareholders recently.
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