On July 10, 2017, WPP (LON:WPP) stock was trading above $101 a share on the New York Stock Exchange, down from its all-time high of $123.33 reached in May, 2015. Despite being down 17.9% already, the Elliott Wave Principle suggested the stock is likely to “lose 30% from current levels”, so we wrote an article to warn investors about it. The chart, which led to our negative outlook nine months ago, is shown below.
WPP is not a bad business and made a record profit of 1.82 billion pounds last year. Unfortunately, the fundamentals often mean nothing to the market. In that case, a five-wave impulse pattern from the low at $22.35 in December 2012 to the top in May 2015 was supposed to be followed by a three-wave decline of the same degree. The support near $70 a share looked like a reasonable bearish target at the time. The next chart shows how WPP stock price has been developing during the last nine months.
The company has not lost 30% of it market capitalization yet, but it did fall to $76.68 on March 23rd, 2018 for a 24.4% plunge since July 2017, bringing the total decline since May 2015 to 37.8%. The three-wave retracement did not develop as a flat correction. It looks more like a W-X-Y double zig-zag with a triangle in wave X. This is irrelevant for the future outlook, though, because flat or zig-zag, the 5-3 wave cycle is now complete. According to the theory, the trend should now resume in the direction of the impulsive sequence, meaning the market is finally going to show some appreciation for WPP’s improving business performance.
In addition, the W-X-Y correction has been developing within the parallel lines of a corrective channel, whose lower line can be expected to discourage the bears. The Relative strength index also supports the positive outlook with a bullish divergence between waves “a” and “c” of Y. If this count is correct, WPP stock is ready to return to its past glory and reward the patience of its investors.