Do you consider investing in the stock market? There are some well-performing American stocks in recent years. Illumina Inc (NASDAQ:ILMN) is definitely one of them. However, you might want to think twice before putting your money in it.
This article explains why.
In October 2011, Illumina fell below $28 per share. Less than three and a half years later, in January 2015, it climbed above $213. Such an explosive rally could easily convince you Illumina is a good choice. But, as Warren Buffett says, the investor of today does not profit from yesterday’s growth. So, is yesterday’s growth going to continue tomorrow?
The Elliott Wave Principle, a technical forecasting method, focused on collective market psychology, suggests otherwise.
As visible on the chart, the advance from $28 to $213 takes the shape of a five-wave impulse with an ending diagonal in wave 5. The theory postulates, that every impulse is followed by a three-wave retracement. But this is not the only reason to be preparing for weakness. The Relative Strength Index indicator supports the negative outlook with a bearish divergence between waves 3 and 5. If this analysis is correct, Illumina is going to be far from well-performing in the next couple of years. Do you still think it is a good investment choice?