The stock of hospital operator Tenet Healthcare plunged to $10 a share when the pandemic arrived in the US in March, 2020. Six and a half years later now, it changes hands for about $267, a 26-fold surge. The company’s sales growth, on the other hand, has been in the single digits the entire time. Turns out that even boring low-growth hospitals can make you a fortune if bought during the panic of a worldwide medical emergency.
Alas, investors cannot profit from yesterday’s surge. The question now is, can Tenet Healthcare stock keep rising going forward, or is it time to look for stock market gains elsewhere? The Elliott Wave chart below seems to be giving us a rather clear answer.
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It reveals that the post-pandemic surge was likely the third wave of a bigger impulse pattern, marked I-II-III-IV-V. It five sub-waves are labeled (1)-(2)-(3)-(4)-(5) and even the impulsive structure of that third sub-wave is clearly visible. According to the theory, every impulse gives way to a three-wave retracement. Just as wave I was followed by wave II, so should wave III be followed by a fourth wave correction, before wave V can complete the entire pattern.
If this count is correct, investors better not extrapolate the recent gains into the future. Instead, Tenet Healthcare stock is more likely to form a bearish reversal and head back down soon. The support of wave (4) of III can be revisited, putting downside targets near $180 within the bears’ reach, before the bulls can return in wave V. From current levels, that’ll be a 30-35% decline.
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