Papa John's (NASDAQ:PZZA), founded in 1984 and headquartered in Louisville, Kentucky, operates approximately 5 200 pizza restaurants globally. The company went public on the NASDAQ stock exchange in 1993 under the ticker symbol PZZA and reached its all-time high of $90.49 in December 2016. Unfortunately, no trend lasts forever and PZZA stock was a big disappointment lately, falling by over 36% in 2017. Investors thought 2018 will bring some relief, but the share price has tumbled by another 11.7% year to date.
In order to find out what to expect from now on, we need to take a look at the daily chart of PZZA stock through the prism of the Elliott Wave Principle. There seems to be a hidden message in the wave structure of the plunge from $90.49 in 2016.
The daily chart of Papa John’s stock reveals a textbook five-wave impulse, labeled (1)-(2)-(3)-(4)-(5). Wave (3) is extended, so its five sub-waves are also visible. The first thing this pattern tells us is that PZZA stock has entered a larger bear market, which is still not over. According to the theory, impulses develop in the direction of the bigger sequence. Since this five-wave decline follows a multi-year uptrend, chances are it fits into the position of wave A of a simple A-B-C zigzag correction with waves B and C remaining. The bad news is that wave C is going to drag the price even lower before the uptrend could resume.
On the positive side, wave B should first lift PZZA stock to the resistance near $70 a share, implying roughly 40% upside from current levels. The MACD indicator also suggests a reversal should soon be expected by showing a bullish divergence between waves (3) and (5). If this is the correct count, the rest of 2018 should look a lot better than its first half.