Nasdaq short: Are you ready for the crash?There are 2 ways to look at the wedge that has formed:
A truncated 5th wave that ends in an Ending Diagonal, or
A W-X-Y-X-Z triple combination retracement.
Side note: To be honest, had the wedge not form in 5 waves in the sub counts, I would really prefer for option 2 to be a “triangle”.
The nice thing about this is that no matter whether it is the 1st or 2nd way, both gave the same direction: down.
There is an advantage to the 1st count though: A sharp move down upon breakdown. The 1st way also has the added advantage of being in-sync with S&P500 and DJIA.
There is actually a 3rd way to look at the wedge, one that I think is highly unlikely: 1-2,1-2,1-2. This way of counting means you will expect the next move up to be a very powerful wave 3. While I think that this is highly unlikely, we have be prepared for freak scenario and thus the stop loss.