We first wrote about Rapid7 in late-August 2019. The stock was hovering above $55.50, but the structure of the post-2016 uptrend suggested a notable decline was in progress. In March 2020, it fell to $31.34, down 52.5% from its all-time high.
A month later, with RPD still below $47, we shared our bullish stance on the stock with our readers. Since the company was and still is a money-losing operation, our optimism wasn’t based on its fundamentals. In fact, both Rapid7 ‘s net loss and debt load grew larger in 2020. Instead, we put our trust on the Elliott Wave chart below, published for free on our website on April 25th, 2020.
The daily chart of Rapid7 revealed a complete 5-3 wave cycle. A five-wave impulse, labeled 1-2-3-4-5, was followed by a clear A-B-C correction. According to the theory, the preceding trend resumes once the corrective phase of the cycle is over.
Buying Rapid7 Stock Sounded Crazy, But It Worked
So, instead of joining the bears below $47 a share a year ago, we thought “a new all-time high is on the cards.” We admit that investing in a money-losing company in the middle of the biggest crisis in 90 years sounded crazy. It turned out to be quite profitable, however.
The bulls just kept going and never looked back. Before the end of 2020, Rapid7 had already doubled to $94.60 on December 22nd. The return from the bottom of the coronavirus panic was even better at over 200%. Now, while RPD is hardly the most overvalued loss-making company out there, we think the easy money has been made. New investors must make sure to understand the business and hope its revenue growth rate stays high.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!