Wave 5 Divergence
Exit

Wave 5 of an Elliott impulse often terminates with momentum divergence. Price makes new extreme while RSI/MACD show weaker readings than wave 3. This signals trend exhaustion and potential ABC correction entry opportunity.

Elliott Wave4H, Daily3:1 R:RModerateExhausted Trend
Divergence
Required
Wave 4 Low
First Target
Deploy This Strategy See Rules

Rules & Configuration

The full rule set, required indicators, suggested configuration, execution flow, and performance parameters for the Wave 5 Divergence Exit setup.

Wave 5 of an Elliott impulse often terminates with momentum divergence. Price makes new extreme while RSI/MACD show weaker readings than wave 3. This signals trend exhaustion and potential ABC correction entry opportunity.

Indicators Used
RSIMACD
Rules
📉 Short Wave 5 Top
  • Clear 1-2-3-4 structure visible with wave 3 being the strongest momentum
  • Price enters wave 5 territory (above wave 3 peak)
  • RSI(14) at wave 5 high < RSI at wave 3 high (bearish divergence)
  • MACD histogram peaks lower than wave 3 peak
  • Bearish reversal candle at wave 5 top (pin bar, shooting star)
  • Enter short on confirmation candle close
  • Stop: above the wave 5 extreme high
  • Target: wave 4 low first, then wave 1 territory
Divergence
Required
Wave 4 Low
First Target
💡 Pro Tip

The cleanest Elliott divergence occurs on the timeframe one step higher than where you're trading. If you trade the 1H, look for divergence on the 4H. Intraday divergences on the trading timeframe alone have too many false signals.

Common questions

What is the Wave 5 Divergence Exit strategy?

Wave 5 of an Elliott impulse often terminates with momentum divergence. Price makes new extreme while RSI/MACD show weaker readings than wave 3. This signals trend exhaustion and potential ABC correction entry opportunity.

What's the pro tip for trading Wave 5 Divergence Exit?

The cleanest Elliott divergence occurs on the timeframe one step higher than where you're trading. If you trade the 1H, look for divergence on the 4H. Intraday divergences on the trading timeframe alone have too many false signals.

What indicators does the Wave 5 Divergence Exit strategy use?

The Wave 5 Divergence Exit strategy uses the following indicators: RSI, MACD. These can be configured directly in AlgoBars AlgoBuilder.

What timeframe works best for Wave 5 Divergence Exit?

The Wave 5 Divergence Exit strategy is best traded on the 4H–Daily timeframe. This can be adjusted based on your trading style and market conditions.

More Elliott Wave Strategies

🌊 Wave 3 Entry 〰️ ABC Correction Entry