Used car retailer CarMax is among the market’s worst performers this year. The stock is down 60% in 2025 as high inflation and strained household budgets forces people to postpone buying a newer vehicle. The average age of an automobile in the US is now the highest ever at almost 13 years. No wonder CarMax is struggling.
The good news is that with the help of Elliott Wave analysis, investors could’ve avoided this year’s carnage in the stock. We published the chart below more than two years ago, in April, 2023. It proves that the bears gave plenty of warning before showing up in 2025.
The daily chart of CarMax revealed that the selloff between $156 and $52 per share was a five-wave impulse pattern. We’d labeled it 1-2-3-4-5 in wave (a). According to the Elliott Wave theory, a three-wave correction follows every impulse, before the trend can resume. This meant that whatever recovery was about to follow, it was going to be corrective in wave (b) and followed by another notable drop in wave (c).
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With that in mind, we thought that wave (b) could lift CarMax stock to the resistance near $100, before the bears return with “downside targets … near $40 or maybe even lower.” The updated chart below shows how the situation developed.
The initial three-wave recovery wasn’t all of wave (b). Instead, it evolved into a bigger A-B-C zigzag correction with a triangle in wave B marked a-b-c-d-e. The bulls fought a good fight, but the best they could achieve was $91.25 on December 19th, 2024. Less than a year later now, CarMax barely held above the $30 mark last week after the company abruptly fired its CEO.
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Elliott Wave-wise, wave (c) looks like another impulse pattern in progress. A sequence of fourth and fifth waves could drag the stock further down, possibly below $20 a share. Once there, the risk/reward would be attractive enough for the bulls to emerge. The company still carries some $17B in net debt, but the operating cash flows have been improving. If CarMax can avoid bankruptcy, the stock could become a multi-bagger as the auto-market cycle turns for the better in the years ahead.
