Here’s an update on my recent posts and live streams regarding Elliott Wave Theory and the predictions they lead to.
If you’ve read previous posts you can jump ahead to “What changed since yesterday? Where are we now?” since the following part is an exact copy to provide those that haven’t seen any of the previous posts with the necessary context.
Today’s live stream at market open can be found at https://www.youtube.com/watch?v=HzhHw321Ep4 so if you have questions that you can’t wait to get answers to, that would be the place since I likely won’t reply to comments until tomorrow.
Disclaimer: This entire post reflects my personal opinion and is in no way financial advice. And for full transparency I also want you to know that I’m holding shares in GME and would financially benefit from any increase in price.
IMPORTANT: Do NOT take any dates shown/predicted in graphs as given. The only thing predicted here are price levels and even those only reflect my personal opinion and are in no way financial advice. Dates shown on the charts for future price levels are completely irrelevant.Previous Posts & Streams
This is a work in progress, and I’m doing my best to provide daily updates here. If you are curious about how we got to this post you can check out any or all of the links below:
- Why $10,000 per share is just a stop along the way… (my initial post)
- Elliott Waves & GME ? Part #2 (follow-up on post #1 that IMHO didn’t get enough attention)
- Riding Elliott Waves to the Moon in GME (GameStop) 03/26/21 (recording of 03/26/21 stream)
- If you want to know where GME is going, read this post! (post after market close on 03/26/21)
- Riding Elliott Waves to the Moon in GME (GameStop) 03/29/21 (recording of 03/29/21 stream)
- Elliott Waves in GME – Update for 03/30/21 (post before market open on 03/30/21)
- Riding Elliott Waves to the Moon in GME (GameStop) 03/30/21 (recording of 03/30/21 stream)
- Elliott Waves in GME – Update for 03/31/21 (post before market open on 03/31/21)
- Riding Elliott Waves to the Moon in GME (GameStop) 03/31/21 (recording of 03/31/21 stream)
What is the Elliott Wave Theory?
Ralph Nelson Elliott came up with a theory that allows the prediction of market movements. In simple terms, he detected ever repeating patterns, so-called waves, that are based on human psychology.According to Elliott Wave Theory looking at a chart, you can ALWAYS identify the market as currently being in any of the 5 waves that make up an impulse wave.
Such an impulse can be bullish or bearish in nature, so don’t assume an impulse wave can only go up.
Each impulse wave – labeled as 1-2-3-4-5 – follows certain rules and is always followed by a corrective pattern – in most cases a ZigZag labeled A-B-C.Each wave within an impulse contains another wave of lower degree and once an impulse finishes wave #5 the entire 1-2-3-4-5 forms a wave of higher degree.In other words, wave-ception as shown in the image below.
Wave-ception – each wave is part of a wave of a higher degree and contains waves of lower degrees that follow specific rules.
In short, we can label the biggest timeframes and work our way down from there to the lowest timeframes. There are rules to what waves of lower degree (subwaves) are allowed in each wave and being able to label those “subwaves” helps us to confirm that our labeling on higher degrees is correct.
The image above is a screenshot of Figure 1-3 in the book Elliott Wave Theory that you can read for free at https://www.elliottwave.com/Free-Reports/Elliott-Wave-Principle or order as a physical copy for $29 at https://www.elliottwave.com/Book/Elliott-Wave-Principle.
Disclaimer: While I am since 03/31/2021 also an affiliate of ElliottWave.com there are NO affiliate links in this post and I’m simply mentioning the resource because it’s the one book I can truly recommend to everyone that wants to learn more about Elliott Wave Theory.
Besides the book, you can also download a handy 1-page cheat-sheet at https://bit.ly/3d06uKW (it’s a Google Drive link) that contains all the possible patterns and rules in one page. However, that cheat-sheet only makes sense if you understand at least the basics of Elliott Wave Theory, so I recommend everyone that just starts out to finish at least chapter #1 of the above-mentioned book.
Last but not least, while you can use any charting software to label your Elliott Waves I’m personally using WaveBasis because they have a lot of features that make it much easier to do precisely that.
Disclaimer: I am NOT affiliated in any way with WaveBasis and the above-linked cheat-sheet is a document I discovered already a while back for free on the internet.Important Aspects To Understand The Rest Of This Post
While during my latest posts I didn’t bother to include the bigger predictions I decided that it’s necessary to provide the right context for my low-level predictions and illustrate that even if I make a mistake on waves of lower degree – like on the 5-min timeframe during the last two days – the overall predictions are unaffected by this.
Important: I know that many of you assume that the highlighted areas, like in the image below, are labeled after the fact. However, in WaveBasis price targets are automatically labeled based on the positions of previous points of the wave pattern. To illustrate that, let’s take a look at the following example:
Predicting the area of wave (5) based on wave (1)-(2)-(3)-(4).
…but that is not the case. To illustrate that, I moved point (4) to a wrong/different position in the image below to show that it would also move the predicted area for wave (5).
Changing wave (4) to a different (in this case completely invalid) position to illustrate that predicted areas in WaveBasis are not considering any candles after the fact but only use the positions/distances/relations of previous wave points to predict the target area of the next wave.
As you can see the predicted are in this case also moved. And again, I did not touch, nor could I if I wanted that highlighted price area in WaveBasis, the area simply moves depending on the placement of previous wave points. Meaning that even if I apply Elliott Waves on the past the predicted price targets simply show up because they follow Elliott Wave Theory and not because of future candles.Applying Elliott Wave Theory in GME – GameStop
Starting with the monthly chart since IPO, this is the labeling of the highest degree I can come up with.
Elliott Wave Theory in GME – Monthly Chart since IPO
Important: My labeling above contains two violations of Elliott Wave “Rules”.
- Wave #4 retraces below the high of wave #1. This is, in this case, ok, because the low of wave #4 only went that far because of buying restrictions, and as stated in chapter 1.8 of the Elliott Wave Theory Book (see below) when there is no “free market” rules have to be considered in the light of the restriction(s). And IMHO restricting buying definitely causes more sell pressure and justifies this violation.
All rules and guidelines of the Wave Principle fundamentally apply to actual market mood, not its recording per se or lack thereof. Its clear manifestation requires free market pricing. When prices are fixed by government edict, such as those for gold and silver for half of the twentieth century, waves restricted by the edict are not allowed to register. When the available price record differs from what might have existed in a free market, rules and guidelines must be considered in that light. In the long run, of course, markets always win out over edicts, and edict enforcement is only possible if the mood of the market allows it. All rules and guidelines presented in this book presume that your price record is accurate.
2. Wave #2 retraces below our starting point #0. This is, in my opinion, ok because we are looking at the chart since the IPO. Regarding that violations, I’m currently also in a discussion with one of my viewers at https://www.youtube.com/watch?v=PyWxvBl53jU&lc=Ugy5iBJVMcH3WZ2V7sJ4AaABAg but even if I’m wrong here, his labeling also results in a very bullish sentiment right now. More information about why I think this is OK can be found in that discussion.
That said, based on the monthly chart – and assuming my labeling is correct – we are currently in wave #5 of the biggest impulse wave we can label. Once that wave #5 finishes the entire 1-2-3-4-5 will also be wave #1 of a bigger degree. Or in other words, if this wave #5 is not our squeeze then the impulse of a bigger degree will be IMHO.
I’m on purpose not showing the predicted price target for this wave #5 because looking at this impulse would be a very rough prediction here and lead to maybe wrong expectations. With each wave of lower degree (subwave) that we map out in this chart, we get more accurate predictions.
Elliott Wave Theory in GameStop Hourly Chart – Subwaves of the bigger Impulse Wave
Added in red wave #3, #4, and the start of wave #5 as shown on the monthly chart above.
And as mentioned – each wave contains waves of lower degrees (subwaves) so wave #5 starting at point 4. in red in the above picture by itself will contain another 1-2-3-4-5 impulse pattern as shown below.
