GME Hourly candles – Primary (i) blew past standard .382 (red oval) and shallow retraces, reaching all the way to the .618 extension of I from II. This should be considered an early indicator that Cycle III will likewise be extended beyond standard Fibonacci extensions for an impulse wave. Primary (ii) retraced beautifully to the .618 target, allowing for calculations of upcoming impulse waves in light blue. Timing should NOT be inferred with label placements.
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PREFACE:
If you are new to my posts, please read this FIRST…
This is an analysis of GME stock price movements using Elliott Wave Theory. To learn the basics of Elliott Wave (EW), please visit r/ElliottWaveTrading. I also recommend the book Elliott Wave Principle by Frost & Prechter (link in that sub). While Elliott Wave is great at predicting price targets in the most probable coming scenarios, it does not make timing projections. Wave development can occur over long periods of time or in just a few candles of the chart (as witnessed in JAN and MAR for GME).
EW can be useful for the investor in many ways, especially if seeking to buy, and looking for the next most probable dip (discount in the share price); it can provide clarity in moments of chaos to aid the observer in understanding likely next moves within a trend or countertrend, avoiding blindness/guessing, among many other uses. It may build stoicism and be easier to avoid paper hands if the dip you encounter was expected. Knowing something may be coming, and what it may look like, is often less distracting that being blindsided.
**REMEMBER THIS**… I AM NOT SAYING SELL, I AM NOT SAYING BUY. I AM NOT SAYING DAY-TRADE THIS. I am not a financial or trading adivsor, and this is not financial or trading advice. I am simply offering my opinion of market movements of GME.
Reading My Charts:
There are a few differing sources for the correct way to label the degree of waves. Some require circles, some double parenthesis. I have settled on this for my waves, and it will be handy to reference this if my charts are to make any sense.
- Supercycle: (I) – (V) may take months or years to complete.
- Wave (I) took nearly 20 years. Wave (II) may have only taken a month.
- Cycle: I-V may take weeks or months to complete
- Primary: (i)-(v) take days or weeks to complete
- Minor: (1)-(5) may take hours or days to complete
- Minuette: i-v may take hours to complete
- Micro: 1-5 may take minutes to hours to complete
- Miniscule: ((i))-((v)) may take minutes to hours to complete
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Weekend Update
Last weekend I updated that it looked like there was the potential for a peak and serious retrace. A review of how the Primary Wave (i) impulse off the May Low developed up from $136.59 provided greater clarity. While it was clear there were SEVERAL impulses to the upside that confirmed the major corrective action of Cycle Wave II had indeed concluded, understanding EXACTLY where price was in the unfolding early stages of Cycle Wave III was a bit of a challenge.
You see, once a major wave such as Cycle Wave II completes, the first subwave of the next leg of the Cycle impulse usually targets the .382 extension of I from II. Again, according to Elliott Wave, we take the full distance covered in Cycle Wave I, from where Supercycle (II) ended at $38.50 to where Cycle I peaked at $347.50 ($347.50-$38.50 = $309 distance traveled), and project that up from the base where we have confirmation of Cycle II completing… $136.59. The .382 extension of I (again, $309 x .382) resides at $254.63. When Primary Wave (i) of Cycle Wave III started with a completed impulse on 5/18 at $189.20, I knew that probably wasn’t all of wave (i)… it did not reach the .382 extension. And the following retrace did not reach the standard for a wave (ii), which would be .618 of wave (i).
The impulses were there… but it just didn’t ‘feel’ like a 3rd wave… because it wasn’t!!! Primary (i) hit the .382… but something was off.
So I kept watching… and standard impulse projections were being hit quite frequently (see my String of Pearls section in my previous write ups about the May projections being hit one after another). Then an impulse that crested the .382, but another shallow retrace. Each subsequent impulse was followed by a shallow retrace. I even thought those retraces must have been sufficient, and believed wave (i) had completed at three different peaks… then It happened… a dramatic rise that reminded me of a special contingency in Elliott Wave theory….
When a Third Wave Extends
Wave One of a third wave has two likely targets: the standard fib already mentioned is the .382, but Third waves are dramatic, and most often, the largest of the three impulses in a five wave move. In an Extended Third Wave, an early indicator is when the first wave surpasses the .382, blows past the .500 and reaches all the way up to the .618 extension of ‘one’ from ‘two’. That is, as an extension of the larger degree first wave completed, as projected up from the larger degree second wave. In this case Cycle Wave I and II had completed with the March High and the May Low. When Cycle Wave III began, it’s first wave then could target either the standard .382 OR the .618. However, as the wave developed, the first candidate wave (i) never hit the .382, and it’s retrace was shallow. As the wave reached higher and higher, at no point was there a wave (ii) retrace down in the standard .618 retrace of (i). Each retrace was very shallow. I even stated last weekend that if wave (i) and (ii) were already in, and this was indeed Primary Wave (iii) already, it certainly didn’t feel like it. No rip-your-face-off impulse to the upside…. yet. AND… since no standard wave two retrace after hitting the .382… was it possible this was an extended Primary Wave (i) reaching for the .618?
Skyrockets In Flight, Afternoon Delight
Then it happened. Tuesday afternoon, 6/8, a major spike sent price up to reach the .618 at $327.55, surpassing that and hitting $343.00 before turning back down. As soon as it did I zoomed out and saw it. Indeed, this looked like a new top for Primary Wave (i), and in private chat I confided that a major impulse wave like a Primary is followed by it’s major corrective wave. At that time I gave a target of $220 and refined it before the market opened Wednesday to target $215 for Primary Wave (ii).
Monday afternoon chat with the epiphany that Primary (i) had extended to the .618
Tuesday morning at market open… $215 retrace target established. Friday morning GME hit $206
Wednesday through Friday, all I saw were post after post of ‘hedgies’ this and ‘hedgies’ that. Perhaps. And I have had many question if Elliott Wave applies to ‘such a manipulated stock’. I even had someone question if EW was only good at upside targeting, as they had never seen accurate downside projections (see above).
After what many called a bloodbath, GME reached my downside target and struck $206.39. Many of those with whom I am in a private chat with kindly acknowledged the precision and stoicism this forewarning provided. What some would call a crisis was merely an expected bump in the road for many of us.
Primary Wave (i) finally completes, with confirmation after Primary (ii) retraces the full .618 standard retrace
Tribe Called Quest –
IF Primary Wave (ii) has indeed completed after reaching the standard .618 retrace, THEN I expect Primary Wave (iii) to get underway, developing in five-wave structures beginning with Minor Wave (1) of (iii), which should target the .382 extension of (i) from (ii) at $289.85, and wave (1) should itself subdivide into five waves as it develops and reaches toward that target. If those waves develop as expected, then the target for wave (3) of (iii) is $417.41, and all (iii) should reach a range between $445.59 and $540.36, the 1.0 extension of the larger degree wave I from II, and the 1.618 extension of the same degree (i) from (ii), respectively since wave (i) extended, so should (iii). Remember, however, if wave (3) extends, its first wave may be an early indicator, and once again we may see a first wave reach for the .618, which would raise all impulse targets in the ensuing waves.
Are we finally getting the dramatic, fabled, oft revered “3rd of a 3rd”… in this case Primary Wave (iii) of Cycle Wave III? If we get those impulse waves to the upside with nominal retraces, then very possibly.
Longer Term Targets Still Intact (not invalidated) –
- (iii) of III UPDATED – at the 1.000 extension of I from II = $445.59;
- $540.36 as 1.618 of (i) from (ii)… EXTENDED IMPULSE IN EFFECT
- III of (III) – at the 1.000 extension of (I) from (II) = $520.12
- (III) – at the 1.764 extension of same degree waves (I) from (II) = $850.23
Here is a taste of where I think we are and where we are headed.
Primary Count = Bullish; Wave (iii) setup to begin… if no further consolidation or downside in Primary (ii)… which we saw plenty of in late March and April as Cycle II drug on and on and on. BUT THIS is now likely a ‘3rd of a 3rd of a 3rd’. Specifically starting the subwaves of Primary (iii) of Cycle III of Supercycle (III).
Extended Impulse targets – I believe GME just completed a wave (ii) retrace after wave (i) extended to the .618. In this graphic, pink 3 is Primary (iii), red iii is Cycle III and the red V a the top completes Supercycle (III). Timing cannot be inferred… just price targets as the waves unfold.
But, what if…
Any further downside would need to be analyzed for incorrect read of impulse in (i), OR a possible deeper wave (ii) exceeding the standard retrace. Major support lies at $136.59, which is the currently labeled start of Primary Wave (i) in Cycle Wave III.
I have no reason to believe we will see more downside immediately, since we have reached the deepest usual target, .618. Cycle Wave II had reached its target, and languished sideways in consolidation and wedges for many weeks. Be prepared for that if the impulses in Primary (iii) don’t materialize immediately.
~~~~~ End Weekend Update ~~~
Big Picture
- I believe we have started Cycle III, with Primary Wave (i) and (ii) likely completed.
- Cycle III must subdivide in five Primary waves: (i)-(v), each likely taking weeks;
- which would each need to subdivide in five Minor waves (1)-(5), each likely taking hour or days;
- which would each need to subdivide in five Minuette waves i-v, each taking hours;
- each subdividing in five Micro waves 1-5, each taking minutes to hours.
Recall that when upcoming waves are projected from the larger degree 1-2, they are guideposts of what to expect, but the more accurate projections come from the calculations of the subwaves as they develop in that wave degree. Once wave (ii) completes, and we have confirmation with a new impulse in wave (1) of (iii), then I can more accurately calculate projections of where (iii) [and then naturally (iv) and (iv) also depending on their subwaves] will complete. Remember – targets may extend if prior subwaves develop with extensions.This is again just one theory of technical analysis (and the most accurate I’ve seen). It is prudent to consider this may be how it plays out, even if hopes are for this to get thrown out the window once we moon and circuit breakers start trippin’ etc. Until moon, I am left with leveraging my understanding of human psychology en masse and how it is reflected in price in the markets. Elliott Wave analysis infers it may be possible…. Diamond Hands are earned, not given!I am so excited for this. Of course if the circuit breakers trip and I get a MOASS instead, I’m sure I’ll be just fine.
~~~~ end of Big Picture ~~~~
Really Big Picture: Major Waves Completed (aka How Did We Get Here?)
- I believe Major Waves (I) and (II) are in place (January High and February Low, respectively)
- I believe we are in major wave (III), with Major waves I and II in place (March high and April low, respectively)
- I believe we are in wave III, with wave (iii) underway
- I believe we just completed wave C of (ii). C completes (ii), but too deep (below $136.59) and this impulse invalidates.
- Longer Term Targets Still Intact (not invalidated) –
- (iii) of III UPDATED – at the 1.000 extension of I from II = $445.59; $540.36 as 1.618 of (i) from (ii)
- III of (III) – at the 1.000 extension of (I) from (II) = $520.12
- (III) – at the 1.764 extension of same degree waves (I) from (II) = $850.23
All of these targets are subject to recalculation as subwaves develop. Subwave target calculations override projections from fibs of larger waves completed, but finding confluence at those fibs is great confirmation.
I realize the MOASS could just blow these labels up and force me to use the double parenthesis-bold-capital Roman numeral ((I)) etc for a degree beyond the current (I-(V). I hope we get that chance. It will be glorious to bust out that gigantic crayon. Word. What is very likely is that once artificial means are employed to satisfy a short squeeze (e.g. circuit breakers; DTCC forced purchases to resolve a defaulting member) then EW targets cease to be effective, and will come back into play once selling of shares occurs on the backside of the squeeze.)
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**Housekeeping Reminder -** Label placements should not be inferred as ‘timing’ projections. EW does not espouse ‘when’, just likely ‘where’ price targets are hit before turning back up or down. Labels are placed on the chart for general ease of visualizing how the wave may develop at price points. There are some great analysts that post Bayesian Timing targets, but I have not seen any doing so for GME yet.
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TL;DR –
Primary Wave (i) extended to reach and surpass the .618 fib, which qualifies this as an ‘extended’ beginning to a third wave, Primary (iii), which will likely raise targets as the wave develops. Wave (ii) retraced the full .618 Friday as projected, surpassing the $215 target when reaching down to $206. If Primary (ii) is complete, then Primary (iii) should subdivide in five waves, with Wave (1) targeting $285.24 (itself dividing into five waves on it’s way to $285). Primary Wave (iii) target between $445.59 (1.0 extension of larger degree wave I from II) and $540.36 (1.618 extension of same degree wave (i) from (ii)). Further downside not likely, but possible, if Wave (ii) continues consolidation/wedge development like Cycle II did after reaching targets. Major support lies at $136.59, which is the currently labeled start of Primary Wave (i) in Cycle Wave III.
~~~~ end TL;DR ~~~~
TA;DR –
Got the big rest I needed after reaching up so high (third highest branch I’ve ever reached). So now that I’ve rested, I may be ready to start swinging for those REALLY high branches. With enough early momentum, I can get there quickly… just need to get a good grip on the first three branches as I start swinging up. Still a really strong branch below if I go down any further. From this branch, I could easily start swinging much higher into the higher branches, with little rests along the way.
~~~~ end TA;DR ~~~~
H4HU – EWApe/HODLer/ 🦍🖍🌊💎👐🏼 /I Like The Stock! I am long GME. I have never sold short.
To learn the basics of Elliott Wave, please visit r/ElliottWaveTrading.
PLEASE NOTE:
- This is not financial advice, I am not a registered broker and this is for entertainment purposes only.
- Past performance does not equal future returns, and all equity investments entail risk.
- The views expressed are the views of the author, and opinions expressed in the text belong solely to the author.
- The views expressed are solely the author’s approach to investing in this specific equity.