close icon

Realty Income Pattern Sets the Stage for a 40% Drop

Realty Income Corp. is a REIT dedicated to delivering dependable monthly dividends to investors. The company owns over 5900 real estate properties and has a market value of roughly $23.5 billion. Adjusted for splits, it went public in 1994 at $8 and reached an all-time high of $76.73 two days ago.

Not counting the dividends, which for REITs are pretty significant, Realty Income has delivered an average annual compounded return of 9.42% over 25 years, easily beating the S&P 500’s return of 7.86% per year over the same period.

However, just as any other security, the stock has had its rough spells. Between September 2008 and March 2009, Realty Income lost 59.1% of its valuation. The second notable decline erased 34.6% from August 2016 to February 2018.

Realty Income has an Elliott Wave Problem

With the stock currently at $75, is this a good time for investors to add Realty Income Corp. to their portfolios? Let’s see what the Elliott Wave principle has to say on the subject.

Realty Income draws a complete Elliott Wave impulse pattern

The weekly chart above reveals Realty Income’s entire progress since the 1994 IPO. It looks like the past 25 years have resulted in a textbook five-wave impulse. The pattern is labeled (1)-(2)-(3)-(4)-(5) and the five sub-waves of wave (3) are also visible. Note how waves (2) and (4) terminated shortly after touching the 61.8% and 38.2% Fibonacci levels, respectively.

This pattern means Realty Income’s larger trend points north. No surprises here – the company is profitable, financially stable and well run. The problem is that according to the theory, a three-wave correction follows every impulse.

If this count is correct, we can expect a notable decline in Realty Income stock very soon. There is also a bearish MACD divergence between waves (3) and (5) to back up the negative outlook. The support area of wave (4) near $45 a share is a natural bearish target. This means the company can lose roughly 40% of its market cap from current levels.

Did you like this analysis? 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!

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Elliott Wave Correction to Drag DraftKings Down 50%

DraftKings, the popular digital sports entertainment and gaming company, went public in April, 2020. It wasn’t a normal IPO, though. The company instead merged with a blank-check company, Diamond Eagle Acquisition Corp., which listed in 2019 at $10 a share. Less than six full months later now, DKNG trades near $57 a share, down from…

Read More »

Alteryx: Can We Trust the Pre-Market Enthusiasm?

Alteryx Inc., a self-service data analytics software provider, saw its shares soar 28% in pre-market trading today. The surge was caused by the better-than-expected Q3 revenue guidance the company issued yesterday. Apparently, the news that AYX was going to make $13-15 million more in quarterly sales than anticipated was enough for investors to boost its…

Read More »

LKQ Shows How An Elliott Wave Cycle Should Look

LKQ Corporation is an auto parts provider, founded in 1998 and headquartered in Chicago, IL. Investors who bought LKQ stock at the IPO price in 2003 and held until 2018 would have multiplied their money by almost 25. On the other hand, those who bought in January 2018 are still under water as the stock…

Read More »

Qualys Stock to Fall Another 40% as Bears Persist

Qualys Inc., founded in 1999 and headquartered in Foster City, CA, provides cloud security and compliance solutions. Given the fast-growing sector the company operates in, it is no surprise that its stock has also been quite hot. At least until recently. Qualys went public at $12 a share in September 2012. Despite a couple of…

Read More »

Electronic Arts Can Lose 50% in Elliott Wave Correction

Electronic Arts hasn’t been able to reach a new all-time high since July 2018, when it climbed to $151.26. However, the stock came close to that last month after the coronavirus panic in March was quickly forgotten. Currently near $127 a share, Electronic Arts holds a rather high valuation at 29 times its expected fiscal…

Read More »

Buffett’s DaVita Stock Looks Like a Bull Trap

Formerly known as DaVita HealthCare Partners Inc., DaVita Inc. provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease. It was founded in 1994 and went public a year later. As of this writing DaVita’s market cap is close to $10.7 billion. The interesting part is that it is…

Read More »

London Stock Exchange Stock Needs a Breather

Stock exchanges are the places where the shares of publicly traded companies change hands. But sometimes we forget that the exchanges themselves are operated by a company, as well. Usually, those companies are also public with their stocks trading on the exchange, too. That is exactly the case with the London Stock Exchange Group plc.…

Read More »

More analyses