Like many others, communications services provider WPP Plc (LON:WPP) stock rebounded handsomely from its Financial crisis bottom at $22.35 a share in late-2008. By May 2015, the bulls had already lifted the price above the $120 mark. The problem is that unlike many other stocks, WPP’s went exactly nowhere during the past two years, locked in the area between $100 and $120. Let’s see if the chart below will help us find out why has the stock price been in no man’s land for so long and what we should expect from now on.
The weekly price chart of WPPGY stock shows that the wonder period between 2008 and 2015 has produced a textbook example of a five-wave impulse, which has been developing between the parallel lines of a trend channel. This actually explains it all, because one of the Elliott Wave Principle‘s main rules states that every impulse is followed by a three-wave correction in the other direction. That is what the lack of direction since 2015 stands for. However, unfortunately for WPP investors, we do not believe the stock is ready to resume its uptrend. Instead, it looks like the three-wave retracement is still in progress in the form of a regular flat correction, whose wave C down is yet to unfold.
If this is the correct count, WPP could lose about 30% of its current market capitalization, because wave C is usually the longest wave of flat corrections. In terms of price, the support area near $70 a share looks like a natural bearish target.