Some say the Elliott Wave Principle can predict only minor short-term price movements, because the long-term outlook depends on fundamental factors. But during the last year, the stock of Peugeot provided us with a great example, which supports the opposite. On March 15th, 2014, we published “Peugeot SA Could Lose One Third”. In that material we warned investors, that Peugeot could decline below the 9.00 euro mark, despite the fact that Peugeot 308 has just been crowned “Car of 2014”. Here is how the forecast looked like almost a year ago.
As visible, there was a perfect five-wave impulsive sequence to the upside. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. So, ignoring all the good news around Peugeot, we thought prices should head south soon. But the forecast did not stop here. Once a correction is over, the larger trend is expected to resume. In this case, this meant another strong rally as soon as the assumed A-B-C decline was over.
There has probably been a lot of news around Peugeot SA during the last 348 days. Financial reports, sells reports, etc. We admit we missed all of them. But, as the next chart will demonstrate, we did not need them, because the Wave Principle makes them irrelevant. Here is a picture of Peugeot stock as it is today.
It turns out prices have been following the forecast pretty close. Peugeot fell to 8.20 in three waves, before rocketing to 14.70, where it currently is. Note, that there is a perfect Fibonacci ratio in addition – wave (2)/(B) is an accurate 61.8% correction. In conclusion, this article demonstrates that the Wave Principle can not only be used to predict the financial markets in the long term, but it produces such accurate forecasts fundamental analysts could not even dream about.
