Wave 3
Wave 3 is usually the longest and most powerful wave in an impulse sequence. It is never the shortest among Waves 1, 3, and 5. That is a hard rule. Wave 3 commonly extends to 161.8% of Wave 1's length, and in strong trends it can reach 261.8% or even further. This is where the real money is made. Volume surges, momentum indicators hit their highest readings, price gaps appear, and the move accelerates. Professional traders focus most of their energy on catching Wave 3. The sentiment shift during Wave 3 is dramatic. By the middle of Wave 3, the old bearish narrative has collapsed and everyone recognizes the trend. You spot Wave 3 by looking for a strong five-wave advance that breaks above Wave 1's high with expanding volume and momentum. If your Wave 3 candidate is shorter than Wave 1, your count is wrong.
After Wave 1 moved Tesla from $150 to $200 (50 points) and Wave 2 corrected to $170, Wave 3 begins. At 161.8% of Wave 1, the target is $250.90 ($170 + $80.90). Price surges past $250, then extends toward $300 at 261.8% ($170 + $130.90). Volume is three times the daily average. The RSI hits 85. Earnings beat expectations during Wave 3, which catalyzes the move. The trader who entered at the Wave 2 low of $170 is now sitting on 76% gains at $300 and begins planning their Wave 5 exit strategy.