In this technical blog, we are going to take a 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 22 March 2020 low unfolded as an impulse structure. Thus suggested that it’s a continuation pattern. And as per Elliott wave theory after a 3 waves pullback, it should do another extension higher in 5 waves impulse structure at least. Therefore, we advised members not to sell the instrument & trade the no enemy areas ( blue boxes) as per Elliott wave hedging remained the preferred path looking for 3 wave reaction higher at least. We will explain the structure & forecast below:

NASDAQ 1 Hour Elliott Wave Chart

NASDAQ 1 Hour Elliott Wave Chart from 5/14/2020 NY update. In which, the cycle from March 2020 low ended 5 waves impulse structure at $9345.50 high. Down from there, the index made a pullback. The internals of that pullback unfolded as Elliott wave double three structure where wave ((W)) ended at $8997.50 low. Wave ((X)) bounce ended in a lesser degree zigzag structure at $9204 high. Down from there, ((Y)) leg lower also unfolded as a zigzag structure & was expected to find buyers at $8853.05-$8637.15 blue box area. From where the buyers were expected to appear in the index looking for another 5 waves rally. Or to do a 3 wave reaction higher at least.

NASDAQ 1 Hour Elliott Wave Chart

Here’s 1 hour Elliott Wave Chart of NASDAQ from 5/19/2020 NY update, in which the index is showing reaction higher taking place from the blue box area. Allowed members to create a risk-free position shortly after taking the longs. It’s important to note that with further market data, we re-adjusted the count by downgrading the degree of labeling in 1 Hour Chart.

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Paypal (NASDAQ: PYPL) is an American online payments company that enables digital and mobile payments on behalf of consumers and merchants worldwide.

Last week, PYPL broke above February 2020 peak to hit an all-time high few days before its first-quarter results then after the earnings came out it soared again. It’s currently up 30% year-to-date and up 68% off March low.

Earlier this year, PYPL ended the rally from 2015 low at $124 as an impulsive 5 waves advance within wave (I) then it corrected that cycle lower in wave (II)) which didn’t take much as the stock dropped 33% in 1 month before buyers stepped again at $82.. Based on the Elliott Wave Theory, a 5 waves advance is followed by a corrective 3 waves pullback then the instrument would resume the main trend looking for another 5 waves to take place at least.

The break higher that took place last week, confirmed the resumption of the bullish trend and opened an incomplete sequence for the stock toward 100% – 161.8% Fibonacci extension area  $176 – $235. Consequently, Paypal is now looking to remain supported above march low $82 and buyers will be looking to join the rally. The next potential opportunity could be soon taking place in short term as the stock entered an extreme area at $140 – $154 which can provide a pullback in 3 or 7 swings which can be used to enter the market before further upside takes place.

PYPL Weekly Chart

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The $QQQ Nasdaq Tracker Long Term Cycles & Elliott Wave

Firstly the QQQ instrument inception date was in March 1999. That was before it ended a larger cycle up from the all time lows in March 2000. The ETF instrument mirrors the price movement of the Nasdaq which did that. As shown below from the March 2000 highs the instrument experienced a steep correction lower in three swings to the October 2002 lows. From there to the October 2007 highs it ended the first of the current series of impulses in the blue color. This makes up the subdivisions of the wave ((III)) that has ended on February 19 2020. It appears possible the correction of the cycle up from the October 2002 lows ended on 3/23/20.

As can be seen, the pullback from the October 2007 highs was in 3 swings that ended in November 2008.  This corrected the cycle up from the October 2002 lows. The wave I was extended in the subdivision of wave (III).  The wave II low created in August 2015 was strong enough to suggest it was correcting the cycle the November 2008 lows.

Additionally it appeared the wave IV was only deep enough to be correcting the cycle from the August 2015 low. Afterward it saw another high in August 2018. The wave (IV) into the December 2018 lows was strong. It suggested it had corrected the cycle from the November 2008 low.

The analysis and commentary continues below the QQQ monthly chart.

Secondly as previously suggested the QQQ instrument mirrors the Nasdaq highs & lows. As already mentioned, the cycle up from the October 2002 lows ended February 19 2020. It is now favored ended correcting the cycle up from the October 2002 lows on 3/23/20. As known, impulses progress in 5-9 & 13 swings. Corrections against the trend proceed in 3-7 or 11 swings. That correction is three swings so far however it remains possible there will be three more to make 7 swings.

The analysis and conclusion continues below the QQQ weekly and daily chart.

In conclusion the instrument can see a pullback lower of the same magnitude as like in the March 2000 highs to October 2002 lows in the wave ((IV)) before turning higher again. This in not the favored view. After another high in the near term it should look like five waves up from the 3/23/20 lows. Afterward, it should see three swings lower to correct the cycle up from the 3/23/20 lows. Since this daily pullback lower has not began I can not measure an extension area until there is some further data to give the area. Do expect the instrument to remain above the 3/23/20 lows for the turn higher.

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Kind regards & good luck trading. Lewis Jones of the ElliottWave-Forecast.com Team