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NQ - why the bottom made last Friday will most likely produce only a temporary bounce

First we should note that the rally off the March 2020 low looks having completed five wave up structure.

Talking about the top I would note:

wave ( v ) up has tagged 123.6% ext of wave( i ) up (I see that fib working well for wave ( v ) up).

The wave ( v ) up topped slightly under 176.4% ext of subwave (a) of wave ( v ) up.

When we deal with the top of a five wave up move we have two targets for inevitable corrective A-B-C pullback:

– the low of a micro wave iv down of subwave (c) of wave ( v ) up (target 1);

– the low of a corrective wave ( iv ) down (TARGET 2);

NQ - 240 min chart updated as of 6-00 PM on 3-05-2021

On the way down we always focus on lows made by previous pullbacks in waves iv of two different degrees:

NQ - 240 min chart updated as of 6-00 PM on 3-05-2021

When a rally that followed the five wave up gets completed we always focus on two retracement fibs applied to the whole rally, from starting point at the bottom to the top:

NQ - 240 min chart updated as of 6-00 PM on 3-05-2021

Those are 23.6% and 41.4% – 44.1%.

23.6% retracement is where normally the first leg down (wave A in a corrective A down – B up – c down structure) finds support.

The cluster formed by 41.45 – 44.1% retracement fibs is much stronger support. This is where a normal A-B-c down corrective structure may find its bottom.

It is very common case when that cluster formed by 41.4% – 44.1% is aligned with teh low made by wave ( iv ) down.

When you see that alignment on your chart that is a good sign that your wave count is correct.

Now let’s zoom-in a little bit to see micro structure of this move down:

NQ - 240 min chart updated as of 6-00 PM on 3-05-2021

You can see that NQ has hit a strong confluence of:

– 23.6% retracement of the whole rally Mar 2020 – Feb 2021; and

– 100% ext of the red subwave (a) down;

Because of NQ bounced off that strong cluster of fibs I consider the low made on Friday as the bottom of the very first (a)-(b)-(c) move down (wave -A- of a corrective -A-B-C- down structure).

In theory that (a)-(b)-(c) move down could be all of the pullback to be followed by another rally to new all time high. But my primary count suggests that this decline was only wave A down out of a large A-B-C down corrective decline.

Again after a completed five wave up structure a corrective A-B-C down decline tends to retrace at least 41.4% of the whole rally and test the low made by a corrective wave ( iv ) down.

If wave A down made a bottom how high wave B up may climb?

NQ - 240 min chart updated as of 6-00 PM on 3-05-2021

To forecast how high a corrective (a)-(b)-(c) up bounce in wave -B- up may climb we should apply retracement fibs to decline in wave -A- down.
A weak corrective bounce may find resistance at 41.4% retracement = 12,900.
A normal corrective bounce may retrace 50% of the preceding decline (13,050).
We can not exclude scenario where wave -B- up stretches’ higher to 66.7% retrace ( 13,337 ).
We will be able to make a more accurate prediction after completion of two subwaves (a) up and subwave ( b ) down based on extensions of subwave ( a ) up.

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