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Elliott Wave Analysis & Forecast: Vodafone Group PLC (VOD)
The Structural Backstory: A Correction Since the Telecom Bubble
To understand where Vodafone (VOD) stands today, we have to look back at the beginning of the millennium. The chart clearly shows a massive, powerful impulse move (labeled Wave 1) that peaked around 2000, coinciding with the peak of the global technology and telecom bubble.
Since that historical high, Vodafone has been locked in a colossal, multi-decade correction. This correction is labeled as the large Green Wave 2? on the chart. This kind of deep, long correction is typical after such an explosive, speculative rise. The entire movement from the 2000 peak appears to be unfolding as a massive A-B-C zigzag pattern, which is the most common corrective structure.
- Wave A (The Sharp Drop): The immediate, brutal decline from the 2000 peak down to the 2003 low is labeled as Red Wave A. This was the panic phase, shedding the excess valuation in a hurry.
- Wave B (The Long Rebound): Following the panic low, the stock spent the next decade and a half climbing back up in a long, complex rebound labeled as Red Wave B. This correction was slow and labored, suggesting it was counter-trend energy rather than the start of a new bull market. The chart labels this as a complex W-X-Y structure, which peaked around the 2015-2016 period.
The Current Focus (As of Jan 2019): The Descent of Wave C
The analysis suggests that Red Wave B completed its complex structure around 2015-2016. Since then, the stock has turned aggressively lower, initiating the third and final leg of the massive correction: Red Wave C.
Red Wave C is critically important because it is expected to be a five-wave impulse sequence and should carry the stock to its ultimate, long-term low. As of January 2019 (with the price near 140.20), the market appears to have completed Blue Wave 1 of this five-wave C sequence, and has just finished a brief, counter-trend rally, likely Blue Wave 2. The small blue circle near the 175 level marks the completion of that temporary upward bounce.
🌊 The Forecast: Targeting the Final Low in Wave C
With Blue Wave 2 concluded, the dominant forecast is for the stock to enter the steepest and most compelling part of the decline: Blue Wave 3 of Red Wave C.
Blue Wave 3 is expected to be powerful and sustained, driving the price well below the recent lows. Its trajectory is shown steeply declining, aiming toward the lower end of the chart.
The Ultimate Target
The Elliott Wave structure strongly suggests that Red Wave C will carry the price significantly lower. While the chart doesn't provide a specific Fibonacci projection number for the end of Wave 3, the final target for the entire Red Wave C is shown in a box that suggests a price range potentially down to 50 pence or lower.
Why such a low target?
- Wave C Equality: In many zigzags, Wave C is equal in length to Wave A. A deep drop is structurally required to balance the preceding waves.
- Completing the Correction: The entire Green Wave 2? correction must structurally exhaust all sellers. The lowest logical price point, or a new all-time low (breaking below the 2003 low of around 85), is often required to achieve this.
- Maximum Financial Pain: As a long-term corrective move, Wave 2 often inflicts maximum pain and doubt on investors before the next bull market can begin.
The Trading Implications: Extreme Caution and Patience
This long-term interpretation offers a clear strategy for investors:
- For Long-Term Investors: Avoid buying VOD for value at this time: The structural risk to the downside remains immense. The best strategy is to be extremely patient and wait for the completion of the entire Red Wave C in the single-digit or low double-digit price zone. That eventual low will mark the generational buying opportunity for Green Wave 3.
- For Traders: The initiation of Blue Wave 3 provides a strong bearish opportunity. Traders should look for confirmation of the breakdown from the Blue Wave 2 high (near 175) to execute short trades, expecting the price action to be fast and directional. This is generally the most profitable leg of any five-wave decline.
- The Follow-Through: After the deep plunge in Blue Wave 3, there will be a minor counter-trend rally, Blue Wave 4, followed by the final capitulation leg, Blue Wave 5, which will ultimately take the price to the long-term bottom.
🚀 The Power of Green Wave 3
It is crucial to look past the current bearish forecast and recognize the immense potential that awaits. If Green Wave 2? (the entire multi-decade correction) finds its structural bottom near the projected low, the market will launch into Green Wave 3.
Green Wave 3 is the next large-scale, multi-year, multi-hundred-percent advance. This wave is usually the most explosive and powerful cycle, likely taking Vodafone far above its previous all-time high of 400. The long wait for the Red Wave C completion is the price of admission to what promises to be an historic opportunity.
Analyst's Summary & Risk Check
The structural analysis of Vodafone as of early 2019 is profoundly bearish for the medium term. The completion of a 15-year correction, Red Wave B, has cleared the way for the final, potentially devastating, decline in Red Wave C. The primary focus now is on the severity and depth of Blue Wave 3.
Risk Check: This bearish count is invalidated if the stock unexpectedly rallies and surpasses the high of Red Wave B (around 2015-2016) before making a lower low. If VOD were to sustain a break above 250, the entire corrective count would need a re-evaluation, suggesting a different, possibly triangular, pattern is in play.
Quote of the Day
“The four most dangerous words in investing are: This time it’s different.” — Sir John Templeton
Crucial Risk Management Advice
Crucial Advice: Effective trading is based on disciplined risk management, not prediction certainty. Always use a firm stop-loss to protect your capital. Macroeconomic news, particularly from the Federal Reserve or the European Central Bank, can override any technical pattern instantly.
About the Author
Ghulam Muhiuddin, Certified Technical Market Analyst
Experience: This analysis reflects the insights gained from 18 Years of consistent market analysis and forecasting, specializing in the application of the Elliott Wave Principle and advanced technical structures.
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