After Nvidia released its earnings report yesterday, which was positive, the market reacted with a decline. Given this reaction, it is important to examine the current market structure more closely to understand the possible scenarios moving forward.
Market Structure Overview:
Since reaching the top of the overarching Wave 3 on June 18, 2024, Nvidia has entered a downtrend. The key question now is whether we are in the midst of a B-Wave correction within Wave 4 or if the market has already transitioned into Wave 5 of the broader trend.
Scenario 1: B-Wave in Wave 4 (White Scenario)
The primary scenario (illustrated in white on the chart) suggests that the market is currently in a B-Wave correction within the larger Wave 4. This scenario indicates that the recent rally could be part of a corrective structure rather than the start of a new impulsive move. If this scenario plays out, we may see a further decline, leading to a lower low in Wave 4 before the market resumes its upward trend.
- B-Wave Correction: The B-Wave is typically a counter-trend move that often gives the appearance of a resumption of the trend but ultimately leads to another move lower.
- Potential for Lower Low: The chart suggests that if this scenario is correct, Nvidia could see another leg down, potentially reaching the support zone around $90-$80, marked on the chart as the target area for Wave 4.
Scenario 2: Overarching Wave 5 (Yellow Scenario)
The alternative, more bullish scenario (illustrated in yellow on the chart) considers the possibility that Nvidia has already completed Wave 4 and has started the final Wave 5 of the broader trend. According to this scenario, the market completed an internal Wave 4 yesterday, and we are now entering Wave 5 of the first wave within the overarching Wave 5.
- Internal Wave Structure: This scenario suggests that the recent decline could be a part of the final corrective wave within Wave 4, and the market is ready to move higher as it begins Wave 5.
- Impulsive Move Potential: If this scenario plays out, Nvidia could see a strong upward move, potentially breaking above the recent highs and continuing its overall bullish trend.
Key Technical Levels:
- Resistance/Support Flip: The chart shows a key level around $125, where previous resistance could now act as support. This level is crucial for determining which scenario is more likely to unfold.
- Fibonacci Retracements: The chart also highlights key Fibonacci levels, particularly around the $100-$90 range, which could act as strong support if the market moves lower.
Conclusion
The current market situation for Nvidia presents two possible scenarios:
- Primary Scenario (White): The market is in a B-Wave correction within Wave 4, which may lead to a lower low before the next bullish phase.
- Bullish Scenario (Yellow): The market has already completed Wave 4 and is beginning Wave 5, suggesting an upcoming impulsive move to the upside.
Given the current setup, the white scenario appears more realistic, but traders should closely monitor the support levels and market behavior to determine which scenario will ultimately play out. The attached chart provides a visual representation of both scenarios, with the white lines indicating the more conservative outlook and the yellow lines showing the bullish potential.