It’s been almost a year since we wrote on December 17th, 2024, that “downside targets below $120 a share” made sense for Zoetis. The animal medicine manufacturer’s stock was trading above $170 at the time, implying that a decline of nearly 30% lied ahead.
At EWM Interactive, we like to combine fundamental metrics with Elliott Wave analysis and in this case both methods pointed south. A forward P/E of 27 was simply too expensive for a slow grower like Zoetis and the chart below suggested that this overvaluation was likely to become a problem soon.
It revealed two simple (a)-(b)-(c) zigzags in what we thought were waves W and X of a bigger double zigzag correction. Both (a)-waves were clear five-wave impulses, marked 1-2-3-4-5., while wave (c) of X was an ending diagonal. Wave (b) of X was a rare expanding triangle, labeled a-b-c-d-e. This count meant that another three-wave structure in wave Y was supposed to drag Zoetis below the bottom of wave W. The following updated chart shows how the situation unfolded.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!
The bulls put up a good fight initially, but a disappointing Q3 earnings report finally convinced them to give up on November 4th. Two weeks later, the stock barely held above $115 a share. Wave Y looks like another (a)-(b)-(c) zigzag, where waves (a) and (c) are impulse patterns, while wave (b) was a running flat correction. As of this writing, Zoetis is down by more than 50% from its late-2021 record high.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!
This is actually good news for the bulls, because once a correction is over the preceding trend resumes. If this count is correct, a bullish reversal can be expected once wave (c) completes wave Y near the $100 mark. Especially since the pre-2021 uptrend can be seen as a five-wave impulse.
We’ve labeled it I-II-III-IV-V, where the five sub-waves of III and V are also visible. The current decline is just the natural correction, which follows every impulse. It is already approaching the 61.8% Fibonacci support level, where retracements often end, giving us another reason for optimism when it comes to Zoetis stock.
