Synchrony Financial spun off from General Electric less than five years ago, but its shareholders have already experienced plenty of market turbulence on their own. 2018, for example, was nothing to brag about. The stock plunged from an all-time high of $40.59 in January to as low as $21.78 in late December.
And as it often happens, the best gains in the stock market come to those who have the courage to buy after a big selloff. Synchrony Financial stock closed at $31.90 last month, up over 46% from the December low. The Elliott Wave structure of this rally is of big interest to us.
The 1-hour chart of SYF stock reveals that the surge from $21.78 to $33.56 is a textbook five-wave impulse. Wave 1 is extended, but wave 3 is still longer than wave 5, so there is no violation of the rule stating that wave 3 cannot be the shortest among waves 1, 3 and 5.
Synchrony Financial Looks Strong
According to the Wave theory, impulses point in the direction of the larger trend. This means that once the corresponding three-wave pullback in wave (2/B) is over, the bulls can be expected to return in wave (3/C). In the long run, we would not be surprised to see Synchrony Financial near $40 a share again.
Besides, it is not just Elliott Wave analysis that makes this stock look promising. Synchrony is the leading provider of private label credit cards in the United States. The company is consistently profitable, conservatively financed and growing. Its 2018 price to earnings ratio of 8.5 suggests it is undervalued, as well.
Technical and fundamental analysis don’t always point in the same direction, but when they do, it is a risk worth taking.
Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodities markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
Disclosure: the author holds a long position in Synchrony Financial stock.