Greater than a yr in the past, on September nineteenth, 2023, we launched our readers to main steel cost playing cards producer CompoSecure (NASDAQ:). It had gone public by way of a SPAC lower than three years in the past and the inventory was nonetheless within the doldrums.
The corporate was the chief in its area of interest, nevertheless, and was not solely healthily worthwhile but additionally extraordinarily undervalued at simply 7 occasions earnings. Along with this, there seemed to be a bullish Elliott Wave setup in place.
It consisted of a number one diagonal sample to the upside, marked 1-2-3-4-5, adopted by a easy A-B-C zigzag to the draw back. Based on the idea, the pattern was speculated to resume within the path of the five-wave sequence. With that in thoughts, we thought that “the inventory can plausibly double from right here.“
In an important instance of the maxim that an inexpensive inventory can at all times change into cheaper, CompoSecure didn’t begin rising straight away. It took its time and even fell additional in wave (2/b) over the next six months. Given its sturdy fundamentals, nevertheless, it didn’t make sense to desert it merely due to the decrease inventory value. In truth, it made sense to purchase extra. Our endurance has been rewarded in the long run.
The catalyst, which triggered the beginning of CompoSecure’s restoration was the publication of its This autumn 2023 report, which shocked to the upside on March sixth. Not lengthy after that, in August, somebody with deeper pockets within the face of David Cote acknowledged the worth we had seen and determined to buy 60% of the corporate. This actually obtained the inventory shifting.
CompoSecure closed at $16.17 a share earlier than Thanksgiving, up 141% since we turned bullish in September, 2023, and 250% from the underside of wave (2). It was definitely worth the wait regardless of the way you slice it. Alas, no pattern lasts perpetually and this one appears to be getting exhausted already. The sharp surge since March seems like a textbook five-wave impulse, marked 1-2-3-4-5 in wave (3).
If this rely is right, a notable pullback in wave (4) all the way down to the 38.2% Fibonacci stage close to $12 a share can quickly be anticipated. One other rally in wave (5) ought to then observe, though fifth waves are by no means assured, since there isn’t any rule stating {that a} five-wave impulse should at all times kind. Typically, a three-wave construction is all of the market can provide. In different phrases, we predict that the straightforward cash has been made in CompoSecure inventory and traders shouldn’t extrapolate the current previous into the longer term.
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