Sherwin-Williams Stock Analysis: A Look at the Recent Surge and What’s Next
In mid-October 2022, Sherwin-Williams (NYSE: SHW) experienced a significant 45% decline that caught many investors off guard. However, a closer look at the market structure revealed a potential turning point for the stock.
Analyzing the stock’s hourly chart and Elliott Wave sequence, it became apparent that Sherwin-Williams may have hit a bottom. The decline from $354 to $195 appeared to be a textbook A-B-C zigzag correction, indicating a possible trend reversal.
As the market theory suggests, once a correction is complete, the previous trend tends to resume. Given Sherwin-Williams’ previous uptrend, it was reasonable to expect a rebound and a push towards new highs. The subsequent rally validated this hypothesis, with the stock reaching a new all-time high near $360.
Despite the impressive recovery, there are a couple of concerns that investors should be mindful of. Firstly, Sherwin-Williams now trades at a high forward P/E ratio of 31, which may not be justified by its revenue growth rate. Additionally, the structure of the recent rally appears corrective, hinting at a potential downside correction in the near future.
If the current pattern plays out as anticipated, Sherwin-Williams could be in for a further decline, with downside targets below $195. Therefore, investors are advised to exercise caution and consider taking profits to mitigate potential losses.
In conclusion, while Sherwin-Williams’ recent performance has been impressive, there are warning signs that suggest a potential pullback in the near future. By staying informed and proactive, investors can navigate the market volatility and protect their investments.