Do you remember “Black Monday”? It was August 24th, 2015, when most stocks, including Pfizer Inc., saw their worst sell-off in four years. And while the majority of traders and investors were caught completely off guard by this swift and sharp decline, to Elliott Wave analysts there was nothing surprising about it, as “You Should Not Have Trusted Pfizer” proves. However, the purpose of this article, published on October 4th, 2015, was not only to demonstrate the Elliott Wave Principle‘s ability to warn you about an upcoming market crash, but also to make another prediction about Pfizer Inc.’s stock prices. See it on the chart below.
According to the theory, markets moves in repetitive patterns, called “waves”. Five waves in the direction of the larger trend are followed by three waves against it. The five-wave sequence forms a larger pattern, knows as an “impulse”, while the three-wave move is a correction, usually marked with A-B-C. As the chart above shows, Pfizer’s impulse was over at $36.43. That is the starting point of the corrective phase of the 5-3 cycle. So, through the perspective of the Wave Principle, the so-called “Black Monday” was nothing more than a natural wave A, part of a larger A-B-C corrective pull-back. In other words, waves B up and C down were still left, so more weakness could have been expected in Pfizer. The next chart shows how the stock looks like today.
The deceptive wave B has probably caused a lot of optimism within the lines of the bulls. It almost reached the top of wave V of the impulse, climbing as high as $36.04. Despite wave B’s false strength, wave C was still supposed to take prices below the bottom of wave A. Which it did on February 8th, 2016, when the stock fell to as low as $28.23, 24 cents per share lower than the bottom of wave A at $28.47. The only thing we could not predict was the time factor. We did not expect Pfizer’s A-B-C correction to develop that fast. But in technical analysis “where” prices are headed is far more important than “when” are they going to get there.
From now on, it appears wave C still has some room to evolve. It may force Pfizer below the $28 mark, but the support of wave IV is supposed to put the bears’ ambitions to rest. Once wave C is over, the requirement for a pull-back of minimum three legs would be fulfilled and a new recovery could be anticipated.
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