In early-December, 2022, we wrote that there were “Two Elliott Wave Patterns We Cannot Ignore” on the daily chart of Plus500 stock. The company was, and still is, financially strong, profitable and competently managed. Alas, the combination of a triangle correction and an ending diagonal strongly suggested it was time to sell. The stock stood at 1801 GBp at the time of writing. Take a look below.
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The recovery from just under 400 GBp looked like a complete (a)-(b)-(c) zigzag correction. Wave (b) was a triangle, marked a-b-c-d-e. Triangles are known to precede the final wave of the sequence, in this case that was wave (c). And if that wasn’t enough, wave (c) looked like an ending diagonal, which is a reversal pattern in and of itself. That was six months ago. Earlier today, Plus500 stock fell to 1383 GBp, down 23.2% since our December analysis.
However, it then jumped over 8% on the news that the company has bought back most of the stake of Odey Asset Management LLP. Another good managerial decision, by the way. Would it be enough to put the brakes on the stock’s slide, though? The updated chart below makes us skeptical.
You may notice that instead of a contracting ending diagonal, wave (c) evolved into an expanding one. Unfortunately for the bulls, that didn’t change the stock’s fate. What’s even more interesting is that the structure of the recent decline from 1978 GBp to 1383 GBp forms a five-wave impulse. The pattern is labeled 1-2-3-4-5 in wave (1/a) and indicates the direction in which the larger trend is going.
This means that we can expect more weakness once the current recovery in wave (2/b) is over. Initial bearish targets near the support at 1200 GBp remain plausible in wave (3/c). A severe recession, however, can drag Plus500 stock much lower than that. So, we remain on the sidelines. For now, the 18 other positions in our portfolio will suffice.
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