Pfizer Inc.’s four year bull market may be nearing its end. A five-wave rise from the end of June 2010 seems to be reaching a final top. According to The Elliott Wave Principle, a three-wave decline of equal degree should come next. The Relative Strength Index is providing even more evidence for a probable loss of value – a bearish divergence, showing that there is no power behind the seemingly strong uptrend. Rally started at a price of 14$ and it looks like it is going to end around 33$. Normally, the following retracement should send prices back to the 22$ zone. A weekly chart is given below.
The daily chart below gives us a closer look into the wave structure. Since we are expecting a reversal soon, we should be able to find some Elliott Wave patterns suggesting for a trend exhaustion.
And the daily chart shows not one but two reversal patterns. First, a triangle in wave (4) is preceding the final move of one larger degree of trend. Second, in our case the final move is wave (5), which comes in the form of an ending diagonal. Ending diagonals themselves are reversal patterns. If we combine it with a triangle, we have all reasons to expect “a swift and sharp” decline in Pfizer Inc.’s shares. Considering our big picture scenario on the weekly chart, preparing for a 35% decline is a good precaution. After four years of steady rise, feeling a little overoptimistic is not difficult. Statistics show that the biggest buying orders are at major tops, while the biggest selling orders are placed at major bottoms. The current peak could easily fit into the description for a major top. Fortunately, the Wave Principle gives us the proper guidance, so we could step out from the crowd and make our own decisions.
