Acasti Pharma (NASDAQ:ACST) has been struggling to regain its levels seen last June. There were delays in releasing results for TRILOGY 2. But the announcement yesterday that a second Phase 3 clinical trial was unsuccessful resulted in Acasti Pharma shares collapse by over 60%. But this collapse was anticipated by Elliott Waves, although I was not sure of the extent of the down move. One of my clients who was consulting with me on Acasti Pharma has a long position, and I pointed out well in time that it was premature to be buying Acasti. Elliott Waves were pointing to another leg down and hence we needed to wait for that to happen.
Elliott Wave Charts
I am sharing two charts that were sent to my client on 16 August 2020. As you know, I use the Elliott Wave approach to analyze the markets. The first chart of Acasti Pharma clearly said that Elliott Waves was anticipating another leg down and so he needs to get out of any longs immediately.
The next Elliott Wave chart of Acasti Pharma is where I am pointing out the expectation of a C wave down, (after a B wave recovery), irrespective of whether wave A is a 3-wave move or a 5-wave move.
Acasti Pharma collapses as anticipated by Elliott Waves
And now that the adverse news has hit the news-wire, what do you think happened to ACST? Take a look.
Well, some skeptics might think something along the following lines: That is all fine, but what would the case be if ACST had reported success in the test results? You are right, the stock would have raced higher. But the only damage we would have suffered is to our egos. Elliott Wave analysis tells us what to expect in a normal market. When the news works in our favor, the results are spectacular. Without any news also, ACST would have edged lower. But with the bad news, the results were great. If the news had been positive, we would have missed the trade. If we had been SHORT over a good news, even our stop loss order would have been done at the day’s high! But the idea was not to sell short, rather it was to exit all longs.
Hi Ramki – Isn’t it amazing how the Elliott wave already had understood the psychology of traders with the formation of wave counts much before the event
This is also to say news follows at the end but the emotions precede much earlier in the game through whatever news access is available to traders/ investors
Can we also then say that even before the results were announced the crowd had baked in a very negative view about the expected outcome of the tests?
Whatever maybe the speculation, at the end of the day your consulting service prevented me from booking a 60%+ loss if I had held this stock waiting for a better result
This shows how your service is priceless and matchless. No doubt that you are one of the finest Elliott wave experts the market has ever known. God bless you and your family with good health and longer life span so that your service could be a blessing for people who want to go by your advice. Not only that you are a person full of humility, no wonder why you are a genius
Naga, Thank you for your kind words.You asked “Can we also then say that even before the results were announced the crowd had baked in a very negative view about the expected outcome of the tests?”. The answer is a definite no. If the expectation is already built into the price, the reaction will be muted. In fact, in a majority of markets, the tendency is to go the opposite way once the news comes in line with the expectation. So if a very bad result was priced in, meaning if the stock had already moved down a lot ahead of the news in expectation of a bad news, then the price could just move down slightly and the start recovering as traders start taking profits. This phenomenon is often referred as ‘Sell the rumor, buy the fact”. The same is true for a good result that is already priced in. If the news was good, the price could start coming down!
You are also enrolled in my online program and so you know how we USE Elliott Waves. We position in the direction of the most favorable direction. This is dictated by the current position in the cycle. In the case of ACST, a down move was indicated, and was amplified by the UNEXPECTED bad news. Had the UNEXPECTED news been a positive surprise, the stock would have rallied, but after a while, it probably would have started coming back down as per the cycle.
Hello Mr. Ramki,
Wanted to ask in an impulsive wave; can wave two form as a triangle pattern instead of zigzag\flat.
Khalid, Yes, it is possible for wave 2 to be a triangle