Technology is the strongest sector in the current bullish trend in World Indices. Nasdaq (NQ) which has a lot of technology stocks naturally is one of the best performing Indices. We had some pullback in the Indices last week. As always, with every pullback, many traders and analysts start to speculate if major top is in place.

We will look at the chart of Nasdaq to answer this question. We start with the idea that Nasdaq is in an impulsive structure from all-time low. That should be very clear as the Index makes new all-time high and continues to make higher high. For an impulsive structure to end, we need to be able to count a clear 5 waves. In addition, we should see the fifth wave losing momentum and thus we need to be able to observe a momentum divergence.

Let’s now look at the Daily Chart of Nasdaq below and focus especially on the rally from March 2020 low.

Nasdaq Daily Elliott Wave Chart: Path 1

In the daily chart above, we can see the all-time high in Nasdaq came without any momentum divergence. The RSI (Relative Strength Index) shows the strongest momentum peak at the same time when the Index makes all-time high. Thus, we can conclude that the previous all-time high is unlikely to be a wave V from March 23 low. One possibility then is to label the previous all-time high to be wave III. In this scenario, the Index should be in wave IV in 3, 7, or 11 swing before it resumes higher again.

Assuming the placement of wave I and II is correct, potential target for wave IV is 23.6 – 38.2 Fibonacci retracement of wave III which is 10508 – 11249. This is a guideline for where wave IV usually ends, but not a rule. Also as a guideline, it’s better for wave IV not to retrace more than 50% of wave III or else it becomes too big and no longer be a wave IV. A 50% retracement of wave III is 9910. Nasdaq last week has already hit 23.6 retracement at 11249. Thus in fact, the Index can start to make new high again from here. However, it can still do a double correction and perhaps reach around 38.2 retracement at 10508 area before ending wave IV and resumes higher again.

Nasdaq Daily Elliott Wave Chart: Path 2

Let’s assume for a moment that Nasdaq is doing larger decline. If it drops more than the proposed 50% of wave III at 9910 like the first chart above suggests, it will increase the chance it’s no longer a wave IV. In this scenario, Nasdaq perhaps has ended cycle from March 23 low as a corrective structure ABC. The reason is because there’s no momentum divergence at the peak and thus the structure of the rally is likely not a 5 waves.

However, since Nasdaq is at all-time high and thus the entire rally from all-time low has to be impulsive, the Index can’t possibly end the entire impulsive structure with 3 waves structure. Thus, in case of a bigger pullback, another path can be that Nasdaq rally from 3.23.2020 low is in an ending diagonal structure. In this case, the rally from 3.23 low ended wave (I). We can then see a larger pullback in wave (II) to correct cycle from March low before Index resumes higher again.

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In this technical blog, we will look at the past performance of 1 hour Elliott Wave Charts of NASDAQ index, which we presented to members at elliottwave-forecast. In which, the rally from March 22 March 2020 low unfolded as an impulse structure with a higher high sequence favored more upside extension to take place. Therefore, we advised members not to sell the index & buy the dips in 3, 7, or 11 swings at the blue box areas. We will explain the structure & forecast below:

NASDAQ 1 Hour Elliott Wave Chart

NASDAQ 1 Hour Elliott Wave Chart from 7/24/2020 Midday update. In which, the cycle from 29 June 2020 low ended wave ((1)) as 5 waves impulse structure at $11058.50 high. Down from there, the index made a pullback in wave ((2)). The internals of that pullback unfolded as Elliott Wave Flat Structure. Whereas, wave (A) ended in 3 swings at $10358.75 low. Wave (B) bounce also ended in 3 swings at $11058 high. Down from there, wave (C) unfolded in 5 waves structure. And managed to reach the $10363.85- $10200.06 100%-123.6% Fibonacci extension area of (A)-(B). From there, buyers were expected to appear for more upside or for 3 wave bounce at least.

NASDAQ 1 Hour Elliott Wave Chart

Here’s 1 Hour Elliott Wave Chart from 8/04/2020 Asia update. The index is showing a reaction higher taking place from the blue box area after ending the Flat correction at $10306.39 low. And breaking to new highs as expected. Allowed members to create a risk-free position shortly after taking the long positions.

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In this blog, we are going to take a look at the Elliott Wave chart of NASDAQ Futures (NQ_F). The 1 hour London chart update from June 8, 2020 shows that the index has ended the cycle from May 27 low at 9742.50 high.  NASDAQ then did a pullback to correct that cycle, which ended at 9572.91 low.  From there, the index continued to extend higher. It has broken above the previous high, creating an incomplete sequence to the upside.  Up from 9572.91 low, wave ((i)) ended at 9875.50 high. The subdivision of wave ((i)) unfolded as 5 waves impulse Elliott Wave structure.  Therefore, 3 waves pullback is expected to unfold before the index resumes higher. While above 9572.94 low, the dip in 3,7 or 11 swing is expected to be supported.

NASDAQ Futures 8 June London Elliott Wave Update

The 1 hour NY chart update from June 8 shows that the pullback in wave ((ii)) reached the equal leg blue box area of wave (w)-(x). This is an area where we expect buyers to appear for 3 waves bounce at least. In the Live Trading Room, EWF members managed to buy the dip in the blue box at the 100% extension level (9755.70) as shown in the Trading Journal below.

NASDAQ Futures 8 June NY Elliott Wave Update

June 9 1-hour Asia chart update shows that buyers did appear at the blue box area. The index continued to extend higher from blue box and managed to break above the previous wave ((i)) high. This allows any long position from that blue box to be risk free as stop loss is moved to entry level.

NASDAQ Futures 9 June Asia Elliott Wave Update

The 1 hour NY chart update from June 10 shows that the index continued to resume higher and made all-time high, breaking the previous February high. Members who took the long position from the blue box then managed to close the position at 10050 target for reward to risk ratio of 4.7.

NASDAQ Futures 10 June NY Elliott Wave Update

 

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