Four months ago, the stock of Vestas Wind Systems AS (OTC:VWDRY), the world’s biggest wind turbine manufacturer, was hovering above $95 a share, climbing to heights not seen since September, 2008. The world is slowly but surely switching to green energy. In addition, the company’s new CEO was doing a great job since his arrival in 2013, helping the company return to profitability. In other words, four months ago, future looked bright for Vestas’s shareholders.
But Vestas Wind Systems stock is down almost 36% from the July peak at $98.63, losing over 20% in November alone. After the fact, Vestas CEO Anders Runevad explained that the reason for the crash is hiding in the weaker than anticipated quarterly results accompanied by uncertainty related to the House tax legislation. Trouble is such post-factum explanations are not going to give the money back to shareholders. Such huge losses in the stock market could only be avoided by staying ahead of the news. In Vestas stock’s case, the Elliott Wave Principle put us four months ahead of the crash.
The chart above was included in “Winds Might Change for Vestas Wind Systems”, published on July 20th, 2017. It revealed a textbook five-wave impulse pattern. According to the theory, every impulse is followed by a three-wave correction in the opposite direction. So, instead of joining the bulls above $95, we warned our readers that “a significant pullback in wave (2/B) … could be expected to drag the stock price back to the support area of wave 4 of (1/A) near $55 a share.” November is still far from over, but Vestas Wind Systems’ updated chart below speaks for itself.
Since the five-wave advance was complete, it did not take long for the three-wave pullback to begin. If we were to wait for the bad news, we would inevitably be too late to avoid the crash. The habit of the market is to anticipate, not to follow. Back in July, the market was already anticipating the storm. A chart and an eye for patterns was all it took to recognize the danger.
Now, while the stock trades around $63.50, is it time to start buying? We do not think so, because the decline from $98.63 looks like a single wave down, which means wave (2/B) is still under construction. Waves B and C should occur, before the uptrend could resume in wave (3/C) up.