$NQ #NQ-mini #ElliottWave #Lesson
Elliott Wave Theory is an excellent tool for identifying trending, impulsive moves in the market. These trending moves often subdivide into five smaller waves, forming the foundation of a trend.
Five-Wave Moves (Trending): A five-wave move (up or down) is relatively straightforward, as it follows a clear and dominant trend. When the price is trending upward, it typically forms a sequence of higher highs and higher lows, while a downtrend forms lower lows and lower highs.
Three-Wave Moves (Corrective): Corrective moves, on the other hand, are much more complex. These are typically three-wave structures (a-b-c) and can take on numerous variations, making them harder to predict. Corrective moves occur when the market is in a range-bound, directionless, or consolidative phase.
Range-Bound Behavior: During this phase, price oscillates between support (bottom of the range) and resistance (top of the range). The market often creates false signals, slightly breaking above the previous high or below the previous low, only to sharply reverse back into the range. This erratic movement makes trading during corrective phases especially challenging, as predicting the exact breakout moment and its direction is almost impossible.(edited)
A five-wave up structure acts as a compass in Elliott Wave analysis: A five-wave up structure confirms the trend direction on a higher timeframe.
Now let’s look at the current chart of NQ-mini:
NQ-mini 120 min chart
The last clean five wave up move topped in mid Dec 2024.
Off that top we got a clean corrective -a-b-c down structure.
The problem is that that -a-b-c- down move failed to make a higher low but undercut the low of the Dec’24 rally. This break in the sequence of higher highs and higher lows disrupts the clarity of the uptrend.
Let’s look at this NQ-mini chart again:
two scenarios I would consider having the highest probability:
NQ 120 min chart
It really looks like NQ has been moving up and down following a contracting triangle pattern of consolidation. If that assumption is correct then bears could push it down at least to 21,260.