It took Swedbank AB (OTC:SWDBY), one of Sweden’s biggest financial institutions, ten years to return to its pre-crisis glory. The stock rose from as low as SEK 14.70 in March 2009 to SEK 234 in February 2017 – less than SEK 2 below its February 2007 peak.
And just when it looked like a new all-time high will soon be reached, the situation started to change. Swedbank found itself in a money-laundering scandal, which eventually led to the ousting of CEO Birgitte Bonnesen and the resignation of Chairman Lars Idermark.
The market, always easily intimidated, slammed the stock to SEK 127.20 by late-March 2019, down 46% from the 2017 high. But instead of automatically assuming things are only going to get worse, let’s see what the Elliott Wave principle has to say about Swedbank’s prospects.
The weekly chart reveals that Swedbank’s 2009-2017 rally has the shape of a textbook five-wave impulse pattern, labeled 1-2-3-4-5. An impulse to the upside is generally a good thing for investors. This pattern indicates the direction of the larger trend.
The problem is that before the trend resumes, a three-wave correction in the opposite direction follows. In Swedbank’s case, the correction seems to be a simple A-B-C zigzag with a triangle in wave B. It erased almost half of the bank’s market capitalization.
Swedbank Stock Looks Ready to Recover
The good news is that this decline, albeit severe, fulfilled its purpose to complete the 5-3 wave cycle which began 10 years ago. According to the theory, it is time for the bulls to return and lift Swedbank stock to new all-time highs in the long-term.
If this count is correct, first targets above SEK 240 are quite reasonable. With Swedbank stock currently at SEK 156, total returns of over 50% are there for the taking.