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London Stock Exchange … Stock: Predicting the Collapse of a “Parabolic Rise”

Five-waves up signaled a turn for this stock’s steep upward climb

by Bob Stokes
Updated: April 19, 2022

The first part of the Cambridge dictionary's definition of "parabolic" is: "having a type of curve like that made by an object that is thrown up in the air... ."

It's not straight up vertical but the trajectory is steep. Many investors have seen charts of financial markets which show such a parabolic rise.

Now, let's add the second part of the Cambridge dictionary's definition to the first part: "having a type of curve like that made by an object that is thrown up in the air and falls to the ground in a different place." [emphasis added]

Indeed, many investors have seen how this second part also applies to the price charts of financial markets at times.

Our September 2019 Global Market Perspective called attention to a parabolic rise in the stock price of the London Stock Exchange Group (LSE). Here's the chart and commentary:

2019Bubble

The London Stock Exchange Group has been riding along an upward parabolic curve that has generated a 20-fold increase in the stock price since the late 2000s. Parabolic advances are inherently unsustainable, and this one is even more precarious given that we can count five waves up since the LSE's public debut.

As you may know, the completion of five-waves -- up or down -- signals the start of a new trend, which, in this case, would be down.

Well, here's an update on the price path of LSE from our just-published April Global Market Perspective:

BubbleBurst

The cited fifth wave turned out to be Minor wave 5 of Intermediate wave (3), one degree smaller than we originally anticipated. Intermediate wave (4), the ensuing decline, initially bounced off support, and [Intermediate] wave (5) completed an ending diagonal at 10,010 on February 16, 2021. [Afterwards], LSE Group dropped 30% in six weeks, and a countertrend rally peaked in June 2021.

As noted, sometimes an Elliott wave practitioner must adjust the wave count as a market's action unfolds. After all, the Wave Principle is an "exercise in probability." Having said that, the Wave Principle can sometimes offer amazingly "precise results."

Learn how our global analysts are applying the Wave Principle to 50-plus global markets as you follow the link below this video.

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