close icon

TTD Stock: Don’t Let that 8-fold Surge Seduce You

The Trade Desk Inc. provides a self-service omni-channel software platform enabling clients to purchase and manage data-driven digital advertising campaigns. TTD stock is trading on NASDAQ since September 2016. In less than three years, the shares have surged from the IPO price of $28.75 to over $232 earlier this month.

Early investors have managed to multiply their money by 8 for a total return of 700%. There are money managers out there who would trade their right arm for such gains. Unfortunately, two problems arise.

First and foremost, no trend lasts forever. Extrapolating the past into the future is a dangerous game for stock market investors to play. Second, you cannot profit from yesterday’s growth, so you should not let it seduce you. Imagining what life would be if only you had managed to catch those returns is a waste of time.

Instead, traders and investors must focus on the decisions they make in the present. Is TTD stock a good choice right now or not? Based on traditional fundamental metrics the stock has been obscenely overvalued ever since the IPO, but kept rising anyway. That is why a different approach is needed.

TTD stock poised for an Elliott wave correction

The chart above allows us to take a look at TTD stock’s uptrend through the prism of the Elliott Wave principle. It reveals that a five-wave impulse pattern has been forming since September 2016. Wave 1 looks like a leading diagonal, followed by a simple a-b-c zigzag in wave 2.

The five sub-waves of wave 3 lifted the stock as high as $161.50 in September 2018. Wave 4 is another a-b-c zigzag which erased over 35% of the company’s market cap in just three months. Which brings us to the last four months which have been nothing short of spectacular.

TTD Stock is Running on Hope

TTD stock surged from $102 in late-December to $232 by May 3rd. A return of nearly 130% in less than five months brought The Trade Desk’s trailing P/E ratio to 120. This means investors today are paying upfront for the company’s earnings in the next 120 years.

Of course, the company’s profits can and probably will increase in the years ahead, thus reducing the P/E ratio. However, the current valuation suggests the stock’s main engine right now is hope, not the underlying business. Valuation doesn’t matter until it does. And the Elliott Wave analysis above indicates it may start to matter soon.

According to the theory, a three-wave correction in the opposite direction follows every impulse. If the count above is correct, a major bearish reversal in TTD stock can soon be expected. To make matters worse, corrections often persist until they have erased almost all of wave 5’s gains.

In terms of price, this means the anticipated three-wave retracement can drag the shares back down to the support of wave 4 near $100 – $110 a share, implying a ~50% decline from current levels.

Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our best-selling 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:

GTX Stock May Recover, but Remains Under Pressure

With a market cap of just over $1B, Garrett Motion Inc. is still considered a small company. Founded less than two years ago in Rolle, Switzerland, the company provides electric-boosting technologies for light and commercial vehicle manufacturers. In September 2018, GTX stock started trading on the NYSE. It was hovering in the vicinity of $20…

Read More »

Lockheed Setting the Stage for an Unpleasant Surprise

Lockheed Martin has been one of the best companies to own during the last ten years. The Great Recession dragged the stock down to $57.41. Once again, the point of maximum pessimism turned out to be the best time to buy. Two days ago, LMT closed at a new all-time high of $370.38 a share.…

Read More »

CVI Stock Keeps the Elliott Wave Rally Alive

The first time we wrote about CVR Energy was in September 2016. CVI stock was hovering below $15 a share at the time, following a crash from as high as $72 in 2013. Despite the terrible three years the bulls had to suffer through, our Elliott Wave analysis of CVI stock ‘s weekly chart convinced…

Read More »

WD Stock Gets Vulnerable Near All-Time Highs

Walker & Dunlop Inc. provides financing services to owners of commercial real estate from its 29 offices in the U.S. Valued at just $1.6 billion, the company is a hardly a mainstream name. WD stock has an average daily volume of less than 170 thousand shares. Apparently that is still enough for Elliott Wave patterns…

Read More »

CHKP Stock Can Ruin a Buy-the-Dip Strategy

Check Point Software Technologies is among the global leaders in the field of cyber security. The company was founded in 1993 and is headquartered in Tel Aviv, Israel, but CHKP stock trades on the NASDAQ since 1996. CHKP went though the dot-com bubble and burst in 1999-2002. Its stock price didn’t fully recover from it…

Read More »

Can Facebook ‘s Privacy Concerns Fulfill this Setup?

Facebook ‘s privacy policies are under the microscope once again. Personal e-mails uncovered during an FTC investigation reveal Mark Zuckerberg knew of the company’s problematic privacy practices. Facebook stock still hasn’t been able to fully recover from the crash in the second half of 2018, which dragged the price from $218.62 down to $123.02. How…

Read More »

JPMorgan: Risk is High After 10 Years of Bull Market

Between March 2000 and March 2009, JPMorgan Chase & Co. investors saw their holdings’ value decline by almost 78% as the stock fell from over $67 to less than $15 a share. The next ten years, on the other hand, have been a wonder to behold. JPM stock rose like a phoenix from its ashes,…

Read More »

More analyses