Wave 4 is the pause that traps shorts and tests bulls. After W3\'s surge, the impulse needs to consolidate before its final push. W4 retraces shallowly (typically 23.6 to 38.2 percent of W3), often sideways or in a triangle. Sentiment shifts from confidence to complacency - "the trend is unstoppable now". Bears who shorted W3 try again, assuming this is the top. They will be wrong, but the structural rule cuts both ways: W4 cannot enter the price territory of W1.
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