Burlington Stores Inc. is a branded apparel retailer, which operates approximately 670 stores in the United States. The company, founded in 1972, was taken private in 2006, only to re-emerge as a public entity again in 2013. And while the company’s business performance has been steadily improving in recent years, BURL stock rose in tandem.
The company hit the NYSE at $23.50 in October, 2013. Less than six years later, it is hovering in the vicinity of $160 for a total gain of 574%. If you ask Burlington Stores’ shareholders, there is no such thing as a “retail apocalypse.”
However, extrapolating the past into the future is a dangerous investment strategy. As we’ve seen many times, a slight deceleration in the sales growth rate is enough to spook investors out of their holdings and cause a stock price decline. So let’s look at BURL stock from another angle and see what the Elliott Wave principle has to say about it.
The daily chart of Burlington Stores visualizes the entire uptrend since the company’s IPO in 2013. It shows that the bulls have drawn an almost complete five-wave impulse pattern. Almost, because it looks like wave (5) is still in progress.
Wave (3) is the extended one in this impulse as its five sub-waves are clearly visible, as well. Since there is rarely more than one extended wave in an impulse, we can expect wave (5) to be similar in size to wave (1). It should also exceed the top of wave (3) at $180.27. In terms of price, the $200 mark is reasonable target for the bulls in wave (5).
BURL Stock – Bearish Reversal Ahead
On the other hand, the Elliott wave theory states that a three-wave correction in the opposite direction follows every impulse. This means that instead of joining the bulls above $180, investors would be wise to start taking defensive measures.
The anticipated (a)-(b)-(c) retracement has the potential to erase all of wave (5)’s gains. If this count is correct, a ~30% pullback can drag BURL stock back down to the support area of wave (4) near $130.
Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!