IRFC (Indian Railway Finance Corporation) shows that stock from the BSE 500 universe has surged up to 1100% in two years.
Elliott wave helps to understand the overall maturity of the trend and if the rise is sustainable or not.
Below is the chart of the stock along with the earnings –
IRFC Daily chart with Elliott wave
IRFC Earnings & PE chart:
IRFC chart shows sharp rise in stock prices from below 20 to now near 205 levels. This has given an exorbitant move of more than 1100% in 2 years and more than 600% in last 1 year.
Stock is completing its 5th wave on the upside as per Elliott wave and also showing negative divergence with KST momentum indicator.
It is important to also see of this rise in stock price is associated with rise in earnings or not. Price to Earnings ratio measures the how expensive is the stock compared to the current price.
Above EPS and PE chart shows earnings have not changed much over past 1 year. The PE ratio has continued to rise from 6 to now above 40. This indicates the earnings has not improved whereas stock prices have risen sharply.
There is high possibility that if the level 188 is broken we might see sharp reversal on downside in this stock to 130 or lower levels.
In a nutshell, by combining technical analysis like Elliott wave along with earnings momentum one can form strong combination of fusion analysis for identifying such multibagger stocks when up move is starting and also exit strategy when the stock looks matured as per Elliott wave and about to reverse on downside.
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