Ferrari: Extended fifths and the case for a top
Ferrari has undergone a relentless bull market since February of 2016. With new all-time highs seemingly every day, it is hard to think the stock may be vulnerable to a move that could see it lose 30% or more of its value, but the count would suggest the RACE may be coming to an end.
The wave count in RACE is rather clear and unambiguous. Price has developed what appears to be a mature impulse wave from its 2016 low to its current highs. Waves {1}, {3}, and {5} all subdivide into clear "fives" and waves {2} and {4} subdivide into clear "threes".
What is notable about this wave count is the fact that wave {3} is shorter than wave {1} coupled with the fact that wave (5) of {5} appears to be "extended". One of the main rules of wave development in impulse waves is that wave three cannot be the shortest wave. When you encounter a situation where the third wave of an impulse is shorter than the first wave, you can identify the maximum limit the fifth wave can travel by measuring the length of the third wave and projecting it off the low of the fourth wave. Since wave three cannot be the shortest wave and wave three is still shorter than wave one, wave five must not be longer than wave three in order to satisfy the rule. With this in mind, we can set our upper limit to 498, where wave {5} would become longer than wave {3}.
If we observe the development of wave {5} from its starting point in June of 2022, we can see it has developed in a straightforward manner with clear and clean subdivisions. We can see that wave (5) of {5} has also subdivided into a clear five-wave pattern as price accelerates towards new all-time highs. However, there are cracks showing in the foundation.
Wave (5) of {5} has developed whats called an "extension". An extension occurs when waves 1,3, or 5 of an impulse develop with exaggerated subdivsions that can sometimes be larger than the waves of the one larger degree of which they are apart. Extensions that occur in the fifth (and final) wave of an impulse are useful to identify because the guidelines of wave formation specifically identify behaviour that is unique to the termination of an extended fifth. The guideline explains that following the completion of an extended fifth wave, price will often retrace to at least the second wave low of the same degree in what is usually a sharp move. That puts our minimum downside target at 330.54 but it is likely to only be a rest stop on the way towards more significant levels such as the wave (4) low at 285 and the wave {4} low at 167.45.
The cherry on top is the wave 4 of (5) of {5} triangle pattern. Ive discussed and displayed the terminal nature of the triangle in my writing before and this pattern is no different. Triangles always precede the final move of the trend of the same degree. In this case, it forebodes the impending completion of three degrees of fifth waves in what is likely to be a swift reversal through 412 towards 330 and 285.
The wave count in RACE is rather clear and unambiguous. Price has developed what appears to be a mature impulse wave from its 2016 low to its current highs. Waves {1}, {3}, and {5} all subdivide into clear "fives" and waves {2} and {4} subdivide into clear "threes".
What is notable about this wave count is the fact that wave {3} is shorter than wave {1} coupled with the fact that wave (5) of {5} appears to be "extended". One of the main rules of wave development in impulse waves is that wave three cannot be the shortest wave. When you encounter a situation where the third wave of an impulse is shorter than the first wave, you can identify the maximum limit the fifth wave can travel by measuring the length of the third wave and projecting it off the low of the fourth wave. Since wave three cannot be the shortest wave and wave three is still shorter than wave one, wave five must not be longer than wave three in order to satisfy the rule. With this in mind, we can set our upper limit to 498, where wave {5} would become longer than wave {3}.
If we observe the development of wave {5} from its starting point in June of 2022, we can see it has developed in a straightforward manner with clear and clean subdivisions. We can see that wave (5) of {5} has also subdivided into a clear five-wave pattern as price accelerates towards new all-time highs. However, there are cracks showing in the foundation.
Wave (5) of {5} has developed whats called an "extension". An extension occurs when waves 1,3, or 5 of an impulse develop with exaggerated subdivsions that can sometimes be larger than the waves of the one larger degree of which they are apart. Extensions that occur in the fifth (and final) wave of an impulse are useful to identify because the guidelines of wave formation specifically identify behaviour that is unique to the termination of an extended fifth. The guideline explains that following the completion of an extended fifth wave, price will often retrace to at least the second wave low of the same degree in what is usually a sharp move. That puts our minimum downside target at 330.54 but it is likely to only be a rest stop on the way towards more significant levels such as the wave (4) low at 285 and the wave {4} low at 167.45.
The cherry on top is the wave 4 of (5) of {5} triangle pattern. Ive discussed and displayed the terminal nature of the triangle in my writing before and this pattern is no different. Triangles always precede the final move of the trend of the same degree. In this case, it forebodes the impending completion of three degrees of fifth waves in what is likely to be a swift reversal through 412 towards 330 and 285.
Note
The Aug 20 update specified an upside limit of 498 in Ferrari. Here we can see price managed to test our limit exactly and FAIL before turning lower, a good example of the accuracy of the Elliott Wave Principle. The reversal is a strong signal that wave 5 of (5) of {5} is complete and price should begin turning lower through our downside targets of 412.13 and possibly as low as 330.54 and 285.02 in the longer term.
Jayce, CEWA
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