Is NVDA ending a Wave (B) or are we starting the last Wave (5)?

9월 20일

Let’s first define what Wave 5 is to assess whether we’re still in one.

Personality

Wave 5 is generally less dynamic than Wave 3 in terms of breadth. As Wave 5 progresses, optimism runs extremely high despite the narrowing of participation.

The retail public becomes increasingly interested, fueling this final leg higher. Signs of an optimistic herd mentality are everywhere. The price action in Wave 5 tends to be more sluggish than in Wave 3, and there may be divergence patterns between the two waves, often highlighted by indicators like the Awesome Oscillator (AO), Stochastic, and Relative Strength Index (RSI).

Commercials and institutions typically enter early, during Waves 1 and 3, while the retail public jumps in later, during the Wave 5 phase. At this point, there’s no one left to push prices higher.

Key points to remember: Wave 5 of an impulse consists of 5 sub-waves, which follow the same rules and guidelines as it is part of a fractal structure.

Divergences between volume and price are a reliable clue in the fifth wave. Volume should increase and remain fairly well-maintained, with little additional price progress, signaling a potential reversal.

Rules

Impulse

• Wave 5 always subdivides into an impulse or an ending diagonal.
• Waves 1, 3, and 5 are never all extended simultaneously.

Diagonal

• Wave 5 can form an ending diagonal.
• Wave 5 always ends beyond the end of Wave 3 in a leading diagonal.
• Wave 5 is always shorter than Wave 3 in a contracting diagonal.
• Wave 5 is always longer than Wave 3 in an expanding diagonal.
• Wave 5 always ends beyond the end of Wave 3 in an expanding diagonal.

Guidelines

Impulse

• Wave 5 sometimes doesn’t surpass the end of Wave 3 (this is called truncation).
• Wave 5 is the second most common extended wave, particularly in commodities markets on daily and weekly charts.
• Wave 5 tends to equal Wave 1 when Wave 3 is extended.
• When Wave 5 is extended, it is often in Fibonacci proportion to the net travel of Waves 1 and 3, typically 161.8%.
• If Wave 3 is not extended, Wave 5 is unlikely to form an ending diagonal.

Diagonals

• Wave 5 of a leading diagonal usually subdivides into zigzags but may also appear as an impulse, along with Waves 1 and 3.
• When Wave 5 follows a triangle, it is typically either a brief, rapid move or an exceptionally long extension.
• Wave 5 usually ends at or slightly beyond a line connecting the ends of Waves 1 and 3 (this extended move is known as a throw-over in a contracting diagonal).
• In an expanding diagonal, Wave 5 typically ends just before reaching the line connecting the ends of Waves 1 and 3.

Channels

• Use a deceleration channel to identify when Wave 5 is in progress.

Extended Waves

If both Waves 1 and 3 were regular, it’s likely that Wave 5 will extend.

An irregular correction is often seen at the end of an extended Wave 5, which is prone to what’s known as double retracement.

If Wave 4 was an irregular correction, you can be fairly certain that Wave 5 will extend.

While it’s rare for two sub-waves to extend, it is common for both Waves 3 and 5 to extend when they are of Cycle or SuperCycle degree and occur within a fifth wave of a higher degree.

Fibonacci Ratios

• Wave 5 is often 0.618 times the length of Wave 1.
• Wave 5 is often equal to Wave 1.
• Wave 5 is often 127.2% of Wave 4.
• Note that the orthodox end of Wave 4 can differ from the extreme of Wave 4.

Conclusion:

We’re clearly in a herding phase, but it’s been that way for several months. There’s significant insider selling in NVDA, and it seems investors are starting to realize that AI’s impact on the market isn’t as strong as the narrative suggested. Personally, it’s hard for me to determine whether we’re in Wave B or Wave 5—the next few weeks should clarify the situation. I prefer to wait for confirmation before making a safe short bet. As for going long, I’ll stay away for now—prices are just too high.