medium · Elliott Wave Theory ewt-core
A stock completes a clear 5-wave impulse. You observe that at the peak of Wave 3, the 14-period RSI reached $82. At the peak of the recent Wave 5, the price is higher, but the RSI is at $71.
What does this momentum profile suggest about the current market position?
- Wave 3 is actually extending, with a large rally still likely still ahead.
- This confirms a bullish continuation, since the RSI stayed above the $70 line.
- The impulse is likely complete, as negative divergence is a hallmark of Wave $5.
- The market is instead tracing a leading diagonal, where overlap matters more than RSI here.
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