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:

T Rowe Price Vulnerable After Fibonacci Encounter

Founded in 1937 and based in Baltimore, Maryland, T Rowe Price is one of the largest asset management companies in the world. At the end of Q1 2019 its assets under management stood at $1.11T. That is T for trillion. Besides, T Rowe Price is also a public company which is why it is of…

Read More »

Momo Inc. – The Tinder of China Looks Promising

Based in Beijing, China, Momo Inc. operates a mobile-based social and entertainment platform. The company was founded in 2011 and became public in late-2014. The Tinder of China, as Momo is often referred to, first turned a profit in 2015 and has been enjoying strong earnings and revenue growth in the last three years. Momo…

Read More »

Mondi Group: Little Known Firm, Well Known Pattern

Even Mondi Group themselves acknowledge that not too many people have heard their name. “Our name may not be familiar to the public, but our products are” is written on the second page of the company’s 2018 annual report. Mondi, listed on the London Stock Exchange, is a global paper and packaging company, headquartered in…

Read More »

Swedbank to Benefit from a Bullish Elliott Wave Cycle

It took Swedbank, one of Sweden’s biggest financial institutions, ten years to return to its pre-crisis glory. The stock rose from as low as SEK 14.70 in March 2009 to SEK 234 in February 2017 – less than SEK 2 below its February 2007 peak. And just when it looked like a new all-time high…

Read More »

FOSL Stock Ready to Exceed Expectations?

In October 2013, Fossil Group had a market cap of roughly $7.5 billion. The watchmaker was enjoying record sales and profits, which was supposed to propel FOSL stock, then hovering above $130 a share, even higher. Fast-forward six years and the company is currently valued at less than $650 million with the shares barely above…

Read More »

Bristol-Myers: Elliott Wave Setup can Double the Price

Bristol-Myers Squibb is in the process of acquiring Celgene in a $74 billion dollar cash-and-stock deal including debt. The deal faced opposition from hedge funds Wellington Management and Starboard Value, but ultimately gained shareholder approval on April 12th. Arbitrageurs, who aim to profit from the discrepancy between the market price and the deal closing price,…

Read More »

UnitedHealth Stock Looks Strong Despite Uncertainty

Whether Obamacare is unconstitutional or not is up to the policy makers, but the uncertainty surrounding the matter caused a broad selloff in the healthcare sector. Cigna, Humana, CVS Health and UnitedHealth lost a significant chunk of their respective market caps after the DOJ sided with a December 2018 Texas district court ruling that the…

Read More »

More analyses