Pfizer Inc. stock closed last week at new multi-year highs near 36.71 dollars a share, breaching the previous top of 36.43. Such breakouts could deceive most people to think that just because a stock is obviously in an uptrend, it is a good time to buy it. But in the market environment , obvious things lead to the biggest mistakes. So is Pfizer a “buy” now? Well, it was in March, when we published “Pfizer Obeys the Elliott Wave Rules”. The next chart shows what the Elliott Wave Principle was saying about Pfizer over four months ago.
As visible, we were expecting the resumption of the uptrend, because the weakness from 36.43 seemed to be a three-wave A-B-C correction, and, as the theory states, once a correction is over, the larger trend resumes. This chart was all an Elliott Wave analyst needed to identify Pfizer as a “buy” in March, when it was trading below 30.00. The next one, though, is showing a completely different outlook.
Pfizer began recovering almost immediately and took the previous extremes out in a swift fashion. It was a good call, but what to expect from now on? First, a little relabeling seems appropriate, motivated by two other techniques, which often go hand in hand with the Wave Principle. The first one is channeling, which says that impulses usually develop between the parallel lines of a trend channel. As you can see, the entire rally since 2009 fits into one, while the sub-waves of wave III form another. The second thing, supporting the above-shown count is the Fibonacci ratios between the waves. Wave III equals almost exactly 261.8% the length of wave I, while the decline between 36.43 and 28.24 retraces 38.2% of wave III, which makes it a plausible wave IV. According to this scenario, the current advance to 37.17 is supposed to be wave V. If this count is correct, a major three-wave pullback should be expected from now on, because every impulse is followed by a three-wave correction in the opposite direction. Now let’s take a look at wave V from up close, in order to determine what is left of it.
Wave V could already be seen as a complete impulsive wave. In addition, the MACD indicator is showing the typical bearish divergence between waves 3, 5 of (3) and (5). It definitely does not look good for Pfizer stock right now. So if the recent bullish breakout make you feel optimistic and willing to buy it, our opinion is you should be very careful, because now might be the worst possible moment to join the bulls. Buying Pfizer? No, thank you.
