Rockwell Automation Inc. is a $32B industrial automation and information services provider, headquartered in Milwaukee, WI. The stock has been a long-term outperformer, handily beating the S&P 500 index since the 2009 bottom. The recent past tells a different story, however, as the first half of 2022 erased most of Rockwell ‘s pandemic gains.
ROK reached an all-time high of $355 in mid-December, 2021. Six months later, the stock barely managed to hold above $190 a share, a 46.5% drop. Despite the bulls’ efforts during the second half of last year, which continued in January, 2023, Rockwell ‘s valuation is still far below its record. Can the recovery proceed, though? That’s the question we hope the Elliott Wave chart below can help us answer.
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Unfortunately for the bulls, Rockwell ‘s 4h chart reveals a complete 5-3 Elliott Wave cycle to the downside. It is consists of a five-wave impulse, marked 1-2-3-4-5 in wave (a), and a three-wave corrective recovery, labeled a-b-c in wave (b). Wave ‘c’ looks like an ending diagonal pattern, which is a reversal formation in and of itself. Coupled with the 61.8% Fibonacci resistance level that the price just touched, this is a big warning sign.
The theory states that once a correction is over, the preceding trend resumes. If this count is correct, we can expect another notable selloff in wave (c) to drag Rockwell Automation stock below $190. Actually, we won’t be surprised if the price approached $150 before the bears are done. From the current level of $282, that would be another ~45% decline. Something most investors will happily avoid.
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