161.8% Extension
The 161.8% extension is the single most important Fibonacci projection level in Elliott Wave analysis. It is the golden ratio itself (1.618) applied as a price extension. Wave 3 frequently travels to exactly 161.8% of Wave 1's length, making this the primary target when you are positioned for a third wave move. When price reaches the 161.8% extension and keeps going, you know you are in an extended third wave, and the next targets become 200%, 261.8%, or even 423.6% of Wave 1. When price stalls at 161.8%, it often signals that Wave 3 is completing and Wave 4 is about to begin. This level is also used to project Wave C targets. When Wave C extends beyond equality with Wave A, the 161.8% extension of Wave A is the next logical target. The 161.8% extension works best when it aligns with other technical factors like horizontal support and resistance, round numbers, or volume profile levels. That confluence turns a Fibonacci projection into a high-probability turning point. Traders use this level for both entries and exits depending on their wave count.
Nvidia completes Wave 1 from $400 to $500, a $100 move. Wave 2 retraces to $440. You project Wave 3 by multiplying $100 by 1.618, giving $161.80. Add that to the Wave 2 low of $440 and your Wave 3 target is $601.80. Over the next several weeks, price rallies powerfully with strong volume. The move stalls at $598, within 1% of the 161.8% target. MACD begins rolling over. A trader who bought at $440 in Wave 2 takes profits on 75% of the position near $600 and trails a stop on the remaining 25%.