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 to form, as the chart below demonstrates. Walker & Dunlop went public in 2010 and reached its all-time high of $61.44 in April, 2018. Currently in the vicinity of $53 a share, WD stock’s risk/reward ratio doesn’t seem to be in investors’ favor.
The weekly chart above visualizes WD stock ‘s entire rally since its late-2010 IPO. Its structure looks like an almost complete five-wave impulse, labeled (1)-(2)-(3)-(4)-(5). The sub-waves of wave (3) are clearly visible, as well. The only problem is that wave (5) is not fully-formed yet.
The recovery from the December 2018 low consists of only three-waves, labeled a-b-c. This suggests wave (5) is likely developing as an ending diagonal, rather than a regular impulse. Unfortunately for the bulls, this doesn’t change the outlook much.
According to the theory, a three-wave correction in the opposite direction follows every impulse. Therefore, we can prepare for a notable correction once wave (5) completes the entire post-2010 uptrend. If this count is correct, WD stock can still climb past wave (3)’s top. Instead of a buy signal, however, this bullish breakout should be viewed as a warning sign. The anticipated three-wave retracement has the potential to drag the price down to ~$35 a share.
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