A cluster of resistances ahead during the formation of the first
wave can cause the first wave extensions after the breakouts and
pullbacks to retest those key levels.
A financial instrument that is in a really bullish sector is more likely
to extend during the first wave due to a high demand.
A consistent fight between bullish and bearish market players
at the start of a trend can generate a very gorgeous first wave
Typically during an extended bullish first wave,
the bears believe that no one should be buying the asset, so they are
selling after every rally. On the hand, bullish fundamental investors
are loading the stock because they know better that the fundamentals
are improving rapidly.
That is the case when one group is completely
wrong without knowing it, and the other is spot on.
In the end, there is an extended first wave that aligns with the market
sentiment of those who got it right.
It is paramount that Elliott wave traders get into the habit of finding out
what has truly caused the first wave extensions. That will help one to
understand who are those that creating the new trend.
Most first wave extensions form what I label the irregular first wave. That irregular first wave is usually formed few months later after the Initial Public Offering (IPO). It is a phenomenon that long term investor must take advantage of.
I highly recommend to 24Elliottwaves traders to try everything to master the irregular first wave. An irregular first wave trader must always combine both the financials and technical wave trading like a pro. Please give it enough time and do not rush.
Another cause of the first wave extensions is an extended corrective phase.
So, previously there was a healthy trend that was corrected by a lengthy
correction (may be at least nine years correction). In that instance, if
the company reinvents, restructures and strengthens itself throughout that lengthy correction, one should not be surprised to see a very beautiful tall and extended first Elliott wave.
Are you smiling? That is good because I want you to remember that.
Please do not assume that the first wave will definitely extend because one of those factors is in place. It is possible but not guaranteed that it will extend. That is all.