Current Market Overview:
NVIDIA ($NVDA) has continued its corrective path following a significant sell-off, previously referred to as “Black Monday 2.0.” This sell-off confirmed a corrective structure rather than a bullish impulsive move higher, which was crucial for understanding the ongoing market behavior. The bounce after this sell-off has been classified as a B-Wave (part of the corrective pattern), and it did not indicate a trend reversal but a dead cat bounce—a temporary recovery before further decline.
Wave Structure:
The market is currently unfolding into a Wave C within a larger (4th) corrective wave. Based on the Elliott Wave principle, we are now in Wave 2 of Wave C. Wave 2 is corrective in nature, but this should be followed by a more pronounced bearish move into Wave 3 of Wave C.
The structure of the current retracement is important to note:
- Wave A and Wave B are completed, and we are now focusing on the behavior of Wave 2 within Wave C.
- This move higher in Wave 2 seems to be corrective, which means it’s likely a countertrend move before the downtrend resumes in Wave 3.
Resistance Levels:
The key resistance levels for Wave 2 are between $112 – $119, marked by significant Fibonacci retracement levels. These levels include:
- 0.382 Retracement Level at $112.20
- 0.50 Retracement Level at $115.88
- 0.618 Retracement Level at $119.46
These levels represent a critical area of price action. The expectation is that the price will face strong selling pressure within this zone, leading to a reversal and continuation of the bearish trend.
Downside Projections:
Once Wave 2 completes within the resistance zone, the next move is expected to be Wave 3 of Wave C, which is typically the most powerful wave in a corrective structure. Based on Fibonacci extensions, the projected target range for Wave 3 lies between $88 – $82. This target aligns with previous levels of support and corresponds with Fibonacci levels such as the 1.618 extension, further validating this area as a potential bottom for Wave C.
RSI and Momentum Indicators:
Momentum indicators such as the Relative Strength Index (RSI) are signaling potential exhaustion of the upward corrective move. The RSI has approached overbought conditions, which often precedes a reversal in price action. Divergences in momentum, combined with the overall corrective structure, strengthen the bearish outlook.
Conclusion:
In summary, the technical setup indicates that NVIDIA is approaching a key resistance zone between $112 – $119. This zone will likely mark the end of Wave 2 within Wave C. Following this, a sharp decline is anticipated in Wave 3, with a target between $88 – $82. This move will complete the larger corrective structure, setting the stage for a potential reversal after the completion of the correction.
The market is bearish in the short term, but traders should keep a close eye on the key resistance levels and monitor any significant changes in momentum to confirm the move into Wave 3.
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