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The NASDAQ is at a critical juncture as it navigates through an important Elliott Wave pattern, and the next major move will determine whether the market is heading for a powerful Wave 3 rally or if it is concluding a shorter-term Wave 5. Two key scenarios are currently in play, and both offer distinct upside targets depending on how the market unfolds in the coming days.
Scenario 1: The Start of Wave 3
In the best-case scenario, the recent drop from 18,300 to 17,780 could be the completion of a Wave 2 correction before launching into a larger, more powerful Wave 3. Wave 3 is typically the most explosive phase in an Elliott Wave cycle, characterized by significant upward momentum and often extending 1.618 times the length of Wave 1.
If this scenario holds, the NASDAQ could rally sharply, with a potential target as high as 20,350-20,370, assuming the index follows the typical 1.618 extension rule for Wave 3. Given the market’s current resilience and a positive shift in momentum, this bullish scenario is a plausible outcome. A breakout above the 18,300 level would confirm that the market is indeed in Wave 3, setting the stage for a powerful upward move that could lift the NASDAQ to new highs.
Scenario 2: Completion of Wave 5
However, there is also the possibility that the recent drop from 18,300 to 17,780 was not a Wave 2 correction but instead part of a Wave 4 consolidation. If this is the case, the NASDAQ could be entering a final Wave 5 move to the upside, which would still result in gains but would likely be more limited in scope compared to Wave 3.
In this scenario, the highest target for the NASDAQ would be in the 18,770-18,800 range, marking the completion of the 5-wave sequence. This would represent a more modest rally, and traders should be cautious of potential resistance near these levels, as the completion of Wave 5 would signal the end of the current uptrend and the likelihood of a deeper corrective phase to follow.
Scenario 3: The Bigger Picture
There is also a broader scenario to consider: if the move from 18,000 to 16,700 was a major Wave 2 before a much larger Wave 3, the NASDAQ could be setting up for an even more extended rally in the long term. In this scenario, the potential upside target for the NASDAQ would be similar to the Wave 3 scenario outlined earlier, with targets in the 20,350-20,400 range.
This scenario suggests that the NASDAQ is in the early stages of a multi-year bull market, with a substantial upside still ahead. A break above the 18,300 resistance level would support this view and confirm that the index is on track for a much larger Wave 3 rally in the coming weeks and months.
Conclusion
The NASDAQ is at a pivotal moment, and the next few days will be critical in determining whether the index is in the early stages of a powerful Wave 3 rally or nearing the completion of a shorter-term Wave 5. If the index can break above the 18,300 level and maintain upward momentum, the bullish Wave 3 scenario targeting 20,350-20,400 becomes increasingly likely. However, if the NASDAQ stalls near the 18,770-18,800 range, traders should be cautious of a potential peak and subsequent correction as Wave 5 completes. Either way, the coming moves will offer significant trading opportunities for both bulls and bears.
