Thursday, March 30, 2023

Bellway’s Textbook Pattern Could Double the Stock Price


It was only mid-December 2022 when we shared with readers the bullish Elliott Wave setup we discovered on the chart of British homebuilder Taylor Wimpey (LON:). Less than two months later now, the stock is up 16% already. According to the analysis, the bulls have a lot more room to run from here. Furthermore, it seems TW is not the only company in the sector whose prospects are bright. Rival Bellway Plc looks poised to benefit, as well.

Founded in 1946, Bellway PLC ADR (OTC:) has a £2.7B market capitalization and recorded over £3.5B in revenue in fiscal 2022. Less than three years ago, the company’s valuation was twice higher. The pandemic and resulting inflation landed a one-two punch that knocked over 50% off it. Currently, at £22, the stock is up 40% from its 2022 low but still down 49% from the 2020 all-time high. Can the recent recovery continue for the rest of 2023? The chart below gives reasons for optimism.

Bellway ‘s weekly chart reveals a textbook Elliott Wave cycle. Beginning in April 2000, a giant five-wave impulse, labeled I-II-III-IV-V, lifted the stock from 175 to 4336 pence a share over the following two decades. It included an 80% crash in wave II during the 2008 Great Recession and several smaller but still significant drops along the way.

Fibonacci Support Stops Bellway Bears in Their Tracks

The fractal nature of the markets is also on display here as three lower degrees of the trend are visible within wave III. Its five sub-waves are marked (1)-(2)-(3)-(4)-(5). Wave (3) is subdivided into 1-2-3-4-5. Then, wave 3 of (3) of III is, in turn, marked i-ii-iii-iv-v. Wave IV retraced 38.2% of wave III before wave V completed the pattern in February 2020.

A three-wave correction follows every impulse and that is precisely what happened to Bellway stock. The price crashed to 1736 in wave A during the Covid-19 panic of March 2020. A three-wave a-b-c recovery to 3756 in wave B followed before the bears dragged BWY to 1572 in wave C. The notable leap from the 61.8% Fibonacci support area suggests the worst is over for Bellway stock.

According to the theory, once a correction is over, the preceding trend resumes. If this count is correct, Bellway stock can be expected to head north again. A new all-time record makes sense in the long term. From the current level, this means Bellway stock can more than double in the years ahead.

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