While Henkel (DE:HNKG) (OTC:HENKY) is a household name in the field of consumer goods and personal care, the company is also active in the industrial sector. Founded in 1876 and headquartered in Düsseldorf, Germany, it has a €28 billion (US$31 billion) market cap and sales of roughly €20 (US$22) billion a year. It is fair to say that if stability and predictability is what you’re looking for, Henkel is a good place to start.
Judging by the stock’s 5-year returns, however, that is not what most investors have been looking for. A single share in Henkel switched hands at nearly €130 (US$144) in June, 2017. Last week, it briefly dropped below the €60 (US$66) mark for a 54% decline in less than five years. Should we expect the recent downtrend to continue or a bullish reversal to finally occur soon? The weekly chart below puts things into Elliott Wave perspective.
It appears Henkel ‘s underperformance over the past half a decade was the result of a three-wave correction, following a five-wave impulse. This means we’re most likely seeing a complete Elliott Wave cycle. The motive phase is labeled (1)-(2)-(3)-(4)-(5), where the five sub-waves of wave (3) are also visible. Wave (5) is an ending diagonal. The corrective phase has taken the shape of a simple (a)-(b)-(c) zigzag.
The price is now touching the 61.8% Fibonacci support level, where corrections often end. If this count is correct, we can prepare for a notable bullish reversal as soon as wave (c) is over. In the long term, the anticipated recovery should eventually be able to clear the €130 mark. The next five years are shaping up to be very different than the past five.