The share price of recreational vehicle retailer Camping World Holdings tanked 15.4% yesterday after it missed Q2 EPS estimates despite 9.4% revenue growth. This drop was just the latest in a string of disappointments for investors, who are down almost 70% since the stock reached an all-time high of $49.20 in May, 2021.
The company seems headed in the right direction, though. Sales have picked up despite a 6.5% reduction in the store count, which speaks for improving operational efficiency. The company is also working to reduce its leverage and gain market share. Would all that translate into a higher market valuation, though? The chart below gives reasons for hope.
The daily chart of Camping World stock reveals that the decline from $49.20 to $11.17 can be seen as a simple zigzag correction, marked A-B-C. Wave A was a five-wave impulse, labeled (1)-(2)-(3)-(4)-(5), whose waves (4) and (5) are an expanding flat and an ending diagonal, respectively. The five sub-waves of wave (3) are also visible.
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Wave A was followed by an (a)-(b)-(c)-(d)-(e) triangle correction, before wave C dragged the stock to a five-year low. According to the Elliott Wave theory, triangles precede the final wave of the larger structure. The larger structure here is the A-B-C zigzag and its final wave is C. If this count is correct, a notable recovery makes sense going forward. Now, let’s see if the smaller time-frames support this bullish outlook.
It looks like they do given the clear impulse pattern to the upside on the 1h chart above. We’ve marked the recovery from $11.17 to $19.64 as (i)-(ii)-(iii)-(iv)-(v), where the sub-waves of (iii) and (v) are also visible. The following weakness appears corrective and its (c)-wave is now approaching the 61.8% Fibonacci support level, where second waves often end. According to this analysis, a bullish reversal can soon be expected, turning yesterday’s selloff into a buying opportunity.
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