|INTU Daily Chart|
Turning to the Elliott Wave analysis, the stock appears to be nearing the end of Wave 3. There have been 5 well-defined sub-waves, and as of today Wave 3 has exceeded the height of Wave 1. With declining volume and declining daily ranges, the stage is set for a pullback that will mark Wave 4. Now, here it's important to remember the "alternation rule." Wave 2 and Wave 4 must be alternates either in duration or depth. Since Wave 2 retraced over 65% of Wave 1 in a correction that lasted 3 months, it's likely that Wave 4 will be a flat correction that is relatively short. Wave 4 corrections tend to stall at the top of the last sub-wave iv, and in this case that would be less than the 38.2% correction line and would land around $109. There is also a pretty strong support line at that level, which adds to the probability of a shallow reversal.
Wave 3 could have some life remaining, but it's not likely given that the stock has gone vertical in the past two weeks. The separation between the low and the 10-day simple moving average is a major warning sign. It's extremely likely that, as part of the next move, INTU will pull back not only to the 10-day SMA, but likely as far as the 30-day EMA (Exponential Moving Average) or even the 50-day. A bullish reversal candle - preferably a long range day that closes near the high and leaves a lengthy shadow down to the low - near the 30 or 50-day averages would be our cue to enter a long position.
INTU went ex-dividend on July 8, and paid $0.30 per share, so we don't expect another dividend risk until early October. Be aware, however, that INTU releases their FQ4 earnings on August 18th after the close. We may still be in the midst of Wave 4 at that point, so watch for the earnings release to be the potential catalyst that launches the stock into Wave 5. The price targets for Wave 5 range from $126 to $137, assuming Wave 4 completes around $109. With Wave 5 being a 5-wave impulse itself, there will be several opportunities to hop in and out of INTU while that wave progresses.
One note of caution is in order for those not familiar with Elliott Waves but who are reading these reviews. Wave analysis is intended to tell us where we are in either a trend or a correction. Understanding the wave counts is a great example of 20:20 hindsight. They are great at telling us where we have been. In and of themselves, Elliott Waves do not give us good entry signals, however, because the waves are not necessarily predictive in nature. They do conform rather consistently to certain Fibonacci ratios, and from there we can set price targets, however there's a huge difference between a projected target (used for analysis) and where a stock will reverse in reality. For valid entry and exit points, we must rely on other chart analysis techniques (e.g. support and resistance lines, candle patterns, moving averages, etc.) We use the Elliott Waves to define where the stock is in the overall accumulation and distribution life-cycle, but we use other signals to determine when to enter or exit a position. Hopefully, that concept becomes increasingly clear as we review additional trading techniques.