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Ralph Lauren Stock Set for a 50% Gain?

Ralph Lauren, the maker of Polo, is another top apparel brand, which was left for dead during the “retail apocalypse” of 2017. In just four years between May 2013 and May 2017, the company lost over 65% in market value as the stock fell from an all-time high of $192 to as low as $66.

Then, just when the future looked the bleakest, bargain hunters apparently started picking up RL shares. By July 2018, Ralph Lauren stock was hovering in the vicinity of $148 a share. Unfortunately for the bulls, the roller-coaster did not stop there.

Searching for Elliott Wave Logic in Ralph Lauren

RL closed at $111.57 last week. Since the market price is far more volatile than the company’s fundamentals, our job as analysts is to apply the Elliott Wave principle on the chart below and try to make sense of all the swings.

Ralph Lauren stock forming a textbook Elliott Wave cycle

The 4-hour chart of Ralph Lauren reveals that the recovery from $66.06 to $147.79 is a textbook five-wave impulse, labeled (1)-(2)-(3)-(4)-(5). The five sub-waves of waves (1) and (5) are visible as well.

In addition, the market has obeyed the guideline of alternation, since wave (2) is a sideways correction, while wave (4) is a sharp pullback. What is even more interesting is the structure of the following (a)-(b)-(c) retracement to the 61.8% Fibonacci level.

Wave (b) appears to be an a)-b)-c) running flat correction. Waves a) and b) are simple a-b-c zigzags and then there is an ending diagonal in the position of wave c). Note how extended wave b) of (b) is and how deeply below the bottom of wave (a) it goes.

If this count is correct, there is a perfect 5-3 Elliott Wave cycle on the 4-hour chart of Ralph Lauren stock. According to the theory, we can now expect the larger trend to resume in the direction of the impulsive sequence. Initial bullish targets in the $150 – $170 area are quite reasonable.

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