Own This Rising Stock At Your Own Risk
EWM Interactive | Oct 21, 2016 03:00PM ET
Arthur J Gallagher & Co. (NYSE:AJG), founded in 1927, has its headquarters in Itasca, Illinois, and provides insurance brokerage and risk management services in the United States and internationally. The company’s stock reached an all-time high of 51.24 dollars a share last month, but experienced investors know that it is not a wise thing to buy just because the price is rising. We agree with that, so we made an Elliott Wave analysis of AJG's monthly log chart in order to see if we could find some early warning signs of a probable change in the trend’s direction.
A Few Warnings
It did not take long to spot a few. First of all, the relative strength index is showing a double bearish divergence dating as far back as 2013, when the indicator failed to register the new high made by the price. But the second warning sign is, in our opinion, much more important. The chart above shows that the entire uptrend in Arthur J Gallagher’s stock since 1984 is a nice-looking five-wave impulse. According to the Wave Principle, this pattern is always followed by a three-wave correction of the same degree. So, our count suggests that this might well be the worst possible moment to put your money in this stock, because its 32-year-old uptrend seems to be approaching its end. From an Elliott Wave point of view, the bears are ready to wake up from their long nap and are very, very hungry.
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