Few industries have been hit harder by the COVID-19 pandemic restrictions than the airlines. Flight numbers and passenger traffic have been significantly reduced in Europe and the U.S. since March. Even low-cost carriers like Ryanair were not spared.
Ryanair’s passenger traffic plunged by 99.5% in May and is still down 64% in September. Apparently nobody saw this mess coming as the stock was approaching €17 in early-January. By late-March, it was barely able to hold above €8.
With Europe slowly going into a second round of lockdowns, a closer look at the stock is warranted. Currently above €12.50, it is up over 50% from its March bottom. But can this recovery be trusted?
Ryanair’s weekly chart above allows us to put its entire progress since its 1998 IPOs in Elliott Wave context. The stock surged from a split-adjusted price of €0.425 in 1998 to as high as €19.78 in August, 2017. This rally can be seen as a five-wave impulse, labeled 1-2-3-4-5.
The guideline of alternation between the two corrective waves within this impulse can be observed. Wave 2 is a sideways expanding flat retracement, while wave 4 – a sharp drop of the zigzags family. The five sub-waves of wave 3 are also visible and marked i-ii-iii-iv-v, where wave v is extended.
Even With Planes Grounded, Ryanair Stock Can Still Fly
The theory states that a three-wave correction follows every impulse. That is exactly what has been developing over the past three years. Ryanair’s negative cycle phase took the shape of a simple A-B-C zigzag. Wave C, triggered by the COVID-19 panicked selloff, went very close to the 61.8% Fibonacci level.
If this count is correct, there is a complete 5-3 wave cycle on the weekly chart of Ryanair Holdings plc. According to the theory, the trend can be expected to resume in the direction of the impulsive sequence. In addition, as of its latest report, Ryanair has more cash than debt on its balance sheet. The company’s solvency is not something investors should worry about at this point. €20 a share remains a viable long-term target.
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!
