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LKQ Shows How An Elliott Wave Cycle Should Look

LKQ Corporation is an auto parts provider, founded in 1998 and headquartered in Chicago, IL. Investors who bought LKQ stock at the IPO price in 2003 and held until 2018 would have multiplied their money by almost 25.

On the other hand, those who bought in January 2018 are still under water as the stock hasn’t been able to revisit its $43.86 record high. LKQ spent the entire 2018 declining by nearly 50%. Then it spent the entire 2019 in recovery attempts, but only managed to reach $36.63 in December.

Then then coronavirus selloff dragged it down to $13.31 in March 2020, bringing its total decline from 2018 to 70%. And as if to confirm Sir John Templeton‘s maxim that the best time to buy is at the point of maximum pessimism, LKQ currently trades above $27, up over 100% in six months. Now, let’s see if the Elliott Wave principle can help us make sense of this roller-coaster ride.

LKQ stock chart reveals complete Elliott Wave cycle

LKQ’s weekly chart reveals a textbook 5-3 Elliott Wave cycle. A five-wave impulse pattern, labeled (1)-(2)-(3)-(4)-(5), reached the vicinity of $44 a share in early-2018. The five sub-waves of wave (3) are also visible, while wave (5) looks like an expanding ending diagonal, marked 1-2-3-4-5.

Patient LKQ Investors Should Be Fine

According to the theory, a three-wave correction follows every impulse. The correction in LKQ stock took the shape of a simple (a)-(b)-(c) zigzag, where wave (b) is a smaller a-b-c. The COVID-19 panic corresponds to the sharp plunge in wave (c).

The world seemed to be coming to an end in March. However, once a correction is over the larger trend resumes in the direction of the impulsive sequence. And indeed, surprisingly or not, LKQ started rising. By September 3rd, the stock had climbed to $33.42.

Now, the bears might push the stock price down to the support near $23 in the short-term. Nevertheless, given the bullish Elliott Wave setup, which took 17 years to develop, the long-term outlook remains favorable. And we think it is going to take a lot less than that for LKQ to reach $44 again.

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!

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