Along with airlines and travel, retail has been among the industries hit the hardest by the coronavirus epidemic. Social distancing policies to contain the spread of the disease resulted in mall and store closures around the world. Burlington Stores is one of many victims.
BURL stock exceeded $250 a share in mid-February 2020. A month later, it dipped below $106, down 58% in just one month. And while no-one could’ve predicted the virus outbreak, the crash it caused made a lot of Elliott Wave sense. The chart below, published almost a year ago, on April 13th 2019, explains.
Burlington’s daily chart revealed that the post-2013 uptrend looked like an almost complete five-wave impulse. Waves (1) through (4) were already in place, which meant one last surge in wave (5) can be expected. The $200 mark seemed like a reasonable target at the time.
Burlington Bears Punish Complacent Bulls
On the other hand, the theory states that every impulse is followed by a correction. So, instead of letting complacency set it after 6 years of gains, we thought investors should proceed with great caution. Extrapolating the recent past into the future is extremely dangerous at all times. Even more so if a fifth wave is in progress.
Burlington bulls exceeded $200 and went for $250, making us feel like dummies for a while. However, the larger size of wave (5) didn’t change the wave structure. Trees don’t grow to the sky and trends don’t last forever. Missing out on the last 25% of the rally was much better than suffering the 58% collapse that followed.
Now, the 61.8% Fibonacci level has been reached. This tells us that most of the crash is most likely behind us already. The selloff looks like a single move in wave (a), so another drop in wave (c) seems likely. However, the bullish 5-3 wave cycle is nearly complete. Burlington ‘s uptrend can be expected to resume from the $100 – $90 a share support area.
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!