Nasdaq100 : The Index has been performing well from the past 1year 3 month and has made higher highs.

We believe that markets move in waves and we have seen them moving in waves.

1. Impulsive Wave also known as Motive Wave.

There are 3 basic rules for the formation of Elliot Wave.

1. Wave no 2 should not correct beyond Wave 1, it can correct more than 90% but not 100%.

3. The most Important Wave 3 cannot be the shortest Wave.

In the following security we have seen all 3 rules have been followed perfectly.

After an impulsive move we usually see 3 corrective waves that may be zigzag, triangle or Flat.

We don't know which corrective wave can be followed, but we can trade wave A and C.

So as we can observe at the Top the index has made a Hammer which is a good pattern for reversal, Next day the index followed selling and day after that as well so we can assume that formation of Corrective Wave A  has began.

To trade this wave what are the SL or Target?

So the answer is 0.318-0.618 fibonacci ratio of impulsive wave 5 so 0.318 of wave 5 comes to 14092.81, this would be our first target.

The SL will be the candle closing above 5 wave.

Majorly while trading Waves we don't look at other indicators or oscillators but for some strong confirmation if the move is right we can check that as well.

First let check the RSI, I have shifted the Upper Band and Lower Band to 80-40 as we were in up move.

We have seen divergence in Rsi as well as Rsi has recently broken its support , this support is now the Resistance for Rsi.

Let's Check the MAcd, Macd has just crossed from its high which is a good sign for short, where we expect that the Macd should touch 0 again.

Correction ahead.

Jul 17 2021

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