In the ten years between November 2008 and January 2018, Spirit Aerosystems Holdings (NYSE:SPR) stock surged 1373%. The rally from $7.14 to $105.20 made anyone who happened to catch even a part of it quite happy. The following two years, on the other hand, not so much.
Spirit AeroSystems is down by a third in the last 24 months and trades below $69 a share yesterday. Does the reduced share price make the company a good bet? Let’s hear what the Elliott Wave principle has to say on the weekly chart below.
Spirit’s 2008-2018 rally resulted in a textbook five-wave impulse, labeled 1-2-3-4-5. Interestingly, waves 2 and 4 retraced precisely to the 61.8% and 38.2% Fibonacci levels, respectively. This pattern means the general direction of the stock is up.
However, a three-wave correction follows every impulse. That is what we believe has been unfolding in the past two years. Spirit AeroSystems seems to be declining in wave Y of a W-X-Y double zigzag retracement. Since fifth waves are usually fully retraced, it makes sense to expect more weakness in wave ‘c’ of Y. In the mid-term, downside targets near $50 a share are plausible.
On the bright side, once the support of wave 4 is reached, the 5-3 wave cycle would be complete. A reversal for the beginning of the next bull leg should then occur in that area. For now, though, the bears remain in charge. Spirit AeroSystems stock is not an Elliott Wave bargain just yet.