Primerica Stock: Potential Downturn Ahead
- Due to high regulations and restrictions, life insurance companies rarely go bankrupt in developed countries.
- Besides, the next one is probably not too far ahead and could be even bigger.
- According to the Elliott Wave theory, a three-wave correction follows every impulse.
Due to high regulations and restrictions, life insurance companies rarely go bankrupt in developed countries. Even when that eventually happens, the state usually intervenes to bail the company out or arrange a merger so policyholders are not left holding the bag. That doesn’t mean that investors cannot lose money buying a life insurer’s stock, however. It goes up and down in price just like any other publicly traded security. Primerica (NYSE:), for instance, is still recovering from its recent slump.
Besides, the next one is probably not too far ahead and could be even bigger. As the weekly chart above shows, the stock is on the verge of completing a five-wave impulse pattern, which has been in progress since 2011. We’ve labeled it (1)-(2)-(3)-(4)-(5), where the five sub-waves of (1) and (3) are also visible. If this count is correct, the recent drop from $308 to $231 fits in the position of wave (4). This, in turn, means that the fifth and final wave up is now unfolding.
According to the Elliott Wave theory, a three-wave correction follows every impulse. So instead of joining the bulls once wave (5) makes a new record, we think investors should be thinking about taking profits. The anticipated retracement can drag Primerica stock below $200 a share. Assuming a bearish reversal near $340, that’ll be a decline of roughly 40%.