Despite its bright future, the electric vehicle market has been in the doldrums as of late, and not just Tesla. According to CompaniesMarketCap, EV manufacturer BYD Co. Ltd. is the 20th largest Chinese company with a market value of just over $70B. That’s down by nearly 50% from its mid-2022 all-time high. Having skyrocketing sales and Warren Buffett’s Berkshire Hathaway as an investor apparently still doesn’t provide immunity against stock price declines.
The good news is that if the underlying company is sound, such declines tend to be temporary. And BYD looks like a very sound one. Not only is it growing and profitable, but it also has a big net cash position on its balance sheet. So the only question is, what’s left of the stock’s bear market? The Elliott Wave chart below is giving us a hint already.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to recognize them yourself!
Between its 2008 bottom and 2022 peak, BYD drew a textbook five-wave impulse pattern. We’ve labeled it I-II-III-IV-V, where the five sub-waves of wave III are also visible. Wave 2 of III was an a-b-c running flat correction. One would be forgiven to have given up by 2020, since BYD wasn’t a great long-term investment during the first couple of decades of its existence.
Ironically, everything changed during the Covid-19 pandemic. China’s initial success at preventing the spread of the virus allowed the company to keep expanding into the growing EV market. The stock price surged in wave III, before entering a sequence of fourth and fifth waves. Wave V peaked at $43.61 on the OTC market on June 28th, 2022.
According to the theory, a three-wave correction follows every impulse. That’s precisely how things went for BYD, as well. The current decline looks like a simple A-B-C zigzag, whose wave C is still under construction. It seems to be headed towards the 61.8% Fibonacci support level near $17 a share. Fortunately, once the correction is over, the preceding trend resumes. Instead of extrapolating the current weakness into the distant future, it makes sense to expect a bullish reversal soon. BYD stock seems capable of reaching new all-time records in the long term.
In our Elliott Wave PRO subscriptions we provide analyses of Bitcoin, Gold, Crude Oil, EURUSD, USDCAD, USDJPY and the S&P 500 every Sunday and Wednesday! Check them out now!
The post Buffett Darling BYD to Resume Uptrend Soon appeared first on EWM Interactive.
