Below we have depicted all Elliott Wave patterns that are allowed under a very strict interpretation of the Elliott Wave Principle. Elliott detected most of these patterns, except for the Diagonal 2 pattern. The WXY and WXYXZ pattern have not been defined as such by Elliott, but he already had discovered these sort of combinations. In our Automatic analysis engine we use the WXY and WXYXZ also for Double and Triple Zigzags. This is a much more consistent way of labeling these patterns, since now the ABC waves in waves W and Y are sub waves and an unfitting Wave X has been eliminated. Because of this the Automatic analysis no longer has to search for more than five waves. Using the old definition of for example a Triple Zigzag, the search was for eleven waves, apart from inconsistencies this would have slowed down the analysis considerably. I. Trends :: top :: a. Impulse Pattern Description Impulses are always composed of five waves, labeled 1,2,3,4,5. Waves 1, 3 and 5 are themselves each impulsive patterns and are approximately equal in length. Waves 2 and 4 on the contrary are always corrective patterns. Rules and guidelines The most important rules and guidelines are: - Wave 2 cannot be longer in price than wave 1, and it must not go beyond the origin of wave 1.
- Wave 3 is never the shortest when compared to waves 1 and 5.
- Wave 4 cannot overlap wave 1, except in diagonal triangles and sometimes in wave 1 or A waves, but never in a third wave. In most cases there should not be an overlap between wave 1 and A.
- As a guideline the third wave shows the greatest momentum, except when the fifth is the extended wave.
- Wave 5 must exceed the end of wave 3.
- As a guideline the internal wave structure should show alternation, which means different kind of corrective structures in wave 2 and 4.
In which wave Impulse patterns occur in waves 1, 3, 5 and in waves A and C of a correction( this correction could be a wave 2, 4 or a wave B, D, E or wave X). Internal structure It is composed of five waves. The internal structure of these waves is 5-3-5-3-5. Note that the mentioned 3s are corrective waves, which should be composed of 5 waves in a corrective triangle. b. Extension Pattern Description By definition an extension occurs in an impulsive wave, where waves 1, 3 or 5 can be extended, being much longer than the other waves. It is quite common that one of these waves will extend, which is normally the third wave. The two other waves then tend to equal each other. In our pattern definitions we call it an Extension1 if the first wave extends, an Extension3 if the 3rd wave extends and an Extension5 if the 5th wave extends. Rules and guidelines The most important rules and guidelines concerning an extended wave are: - It is composed of 5, 9, 13 or 17 waves.
- Wave 2 cannot be longer in price length than wave 1, so it should not go beyond the origin of wave 1.
- Wave 3 is never the shortest when compared to waves 1 and 5.
- Wave 4 cannot overlap wave 1.
- Wave 5 exceeds the end of wave 3.
- The extended wave normally shows the highest acceleration.
In which wave Extensions occur in waves 1, 3, 5, and in A and C waves, when compared to each other. Internal structure As a minimum it is composed of 9 waves, though 13 or 17 waves could occur. So the minimal internal structure of the 9 waves is 5-3-5-3-5-3-5-3-5. Note that the 3s mentioned are corrective waves, which could be composed of 5 waves in the case of a corrective triangle. c. Diagonal triangle type 1 Pattern Description Diagonals are sort of impulsive patterns, which normally occur in terminal waves like a fifth or a C wave. Don?t confuse them with corrective triangles. Diagonals are relatively rare phenomena for large wave degrees, but they do occur often in lower wave degrees on intra-day charts. Usually Diagonal triangles are followed by a violent change in market direction. Rules and guidelines The most important rules and guidelines are: - It is composed of 5 waves.
- Waves 4 and 1 do overlap.
- Wave 4 can?t go beyond the origin of wave 3.
- Wave 3) cannot be the shortest wave.
- Internally all waves of the diagonal have a corrective wave structure.
- Wave 1 is the longest wave and wave 5 the shortest.
- The channel lines of Diagonals must converge.
- As a guideline the internal wave structure should show alternation, which means different kind of corrective structures.
In which wave Diagonal triangles type 1 occur in waves 5, C and sometimes in wave 1. Internal structure The internal structure of the five waves is 3-3-3-3-3. d. Diagonal triangle type 2 Pattern Description Diagonal type 2 is a sort of impulsive pattern, which normally occurs in the first or A wave. The main difference with the Diagonal Triangle type 1 is the fact that waves 1, 3 and 5 have an internal structure of five waves instead of three. Experience shows it can also occur in a wave 5 or C, though the Elliott Wave Principle does not allow this. Don?t confuse this with corrective triangles. Diagonals are relatively rare phenomena for large wave degrees, but they do occur often in lower wave degrees in intra day charts. These Diagonal triangles are not followed by a violent change in market direction, because it is not the end of a trend, except when it occurs in a fifth or a C wave. Rules and guidelines The most important rules and guidelines are: - It is composed of 5 waves.
- Wave 4 and 1 do overlap.
- Wave 4 can?t go beyond the origin of wave 3.
- Wave 3) cannot be the shortest wave.
- Internally waves 1, 3 and 5 have an impulsive wave structure.
- Wave 1 is the longest wave and wave 5 the shortest.
- As a guideline the internal wave structure should show alternation, which means that wave 2 and 4 show a different kind of corrective structure.
In which wave Diagonal triangles type 2 occur in waves 1 and A. Internal structure The five waves of the diagonal type 2 show an internal structure of 5-3-5-3-5. e. Failure or Truncated 5th Pattern Description A failure is an impulsive pattern in which the fifth wave does not exceed the third wave. Fifth waves, which travel only slightly beyond the top of wave 3, can also be classified as a kind of failure. It indicates that the trend is weak and that the market will show acceleration in the opposite direction. Rules and guidelines The most important rules and guidelines are: - Wave 2 cannot be longer in price distance than wave 1, so it should not go beyond the origin of wave 1.
- Wave 3 is never the shortest when compared to waves 1 and 5.
- Wave 4 cannot overlap wave 1, except for diagonal triangles and sometimes in waves 1 or A, but never in a third wave. There should not be overlap between wave 1 and A.
- Wave 5 fails to go beyond the end of wave 3.
- As a guideline the third wave shows the greatest momentum.
- As a guideline the internal wave structure should show alternation, which means different kinds of corrective structures.
In which wave A failure can only occur in a fifth wave or a C wave, but normally not in the fifth wave of wave 3. Internal structure It must be composed of five waves. II. Corrections :: top :: a. Zigzag Pattern Description A Zigzag is the most common corrective structure, which starts a sharp reversal. Often it looks like an impulsive wave, because of the acceleration it shows. A zigzag can extend itself into a double or triple zigzag, although this is not very common, because it lacks alternation (the same two patterns follow each other). Notice that the zigzag can only be the first part of a corrective structure. Rules and guidelines - It is composed of 3 waves.
- Waves A and C are impulses, wave B is corrective.
- The B wave retraces no more then 61.8% of A.
- The C wave must go beyond the end of A.
- The C wave normally is at least equal to A.
In which wave Most of the time it happens in A, X or 2. Also quite common in B waves as a part of a Flat, (part of) Triangles and sometimes in 4. Internal structure A single Zigzag is composed of 3 waves, a double of 7 waves separated by an X wave in the middle, a triple of 11 waves separated by two X waves (see pictures below). The internal structure of the 3 waves is 5-3-5 in a single Zigzag, 5-3-5-3-5-3-5 in a double. Example of a Double Zigzag As you have noticed we have a more modern representation of the Double Zigzag using the labels WXY instead of ABCXABC. This is more consistent, since this way 2 zigzags of lower degree get connected to each other by waves of higher degree. On top if that, our automatic analysis needed such a consistent method of labeling to reach maximum performance. Instead of labeling 7 waves (ABCXABC), the Automatic analysis needs to label only 3 waves (WXY). According to the same method a Triple Zigzag is represented by WXYXZ instead of ABCXABCXABC. This way the number of waves was reduced to five instead of eleven. b. Flat Pattern Description Flats are very common forms of corrective patterns, which generally show a sideways direction. Waves A and B of the Flat are both corrective patterns. Wave C on the contrary is an impulsive pattern. Normally wave C will not go beyond the end of wave A.
Rules and guidelines - It is composed of 3 waves.
- Wave C is an impulse, wave A and B are corrective.
- Wave B retraces more then 61.8% of A.
- Wave B often shows a complete retracement to the end of the previous impulse wave.
- Wave C shouldn?t go beyond the end of A.
- Normally wave C is at least equal to A.
In which wave It occurs mostly in B waves, though also quite common in 4 and 2. Internal structure As mentioned before a Flat consists of 3 waves. The internal structure of these waves is 3-3-5. Both waves A and B normally are Zigzags. c. Expanded Flat or Irregular Flat Pattern Description This is a common special type of Flat. Here the B wave is extended and goes beyond the (orthodox) end of the previous impulsive wave. The strength of the B wave shows that the market wants to go in the direction of B. Often a strong acceleration will take place, which starts a third wave or an extended fifth. If the C wave is much longer then A, the strength will be less. Rules and guidelines - It is composed of 3 waves.
- Wave C is an impulse, waves A and B are corrective.
- Wave B retraces beyond the end of the previous impulse, which is the start of wave A. The C wave normally is much longer then A.
In which wave This corrective pattern can happen in 2, 4, B and X. If it happens in 2 and C is relatively short, normally an acceleration in the third will take place. Internal structure It is composed of five waves, which have an internal structure of 3-3-5. d. Triangles Contracting Triangle: Pattern Description A triangle is a corrective pattern, which can contract or expand. Furthermore it can ascend or descend. It is composed of five waves, each of them has a corrective nature. Rules and guidelines - It is composed of 5 waves.
- Wave 4 and 1 do overlap.
- Wave 4 can?t go beyond the origin of wave 3.
- Wave 3 cannot be the shortest wave.
- Internally all waves of the diagonal have a corrective wave structure.
- In a contracting Triangle, wave 1 is the longest wave and wave 5 the shortest. In an expanding Triangle, wave 1 is the shortest and wave 5 the longest.
- Triangles normally have a wedged shape, which follows from the previous.
- As a guideline the internal wave structure should show alternation.
In which wave Triangles occur only in waves B, X and 4. Never in wave 2 or A. Internal structure It is composed of five waves, of which the internal structure is 3-3-3-3-3. Expanding Triangle: Ascending Triangle: This is a triangle, which slopes upwards. This pattern has been implemented in the Modern Rules. Descending Triangle: This is a triangle, which slopes downwards. This pattern has been implemented in the Modern Rules. Running Triangle: This is a triangle where the B wave exceeds the origin of wave A. e. WXY or Combination Many kinds of combinations are possible. Below a rather complex example has been depicted. Pattern Description A Combination combines several types of corrections. These corrections are labeled as WXY and WXYXZ if it is even more complex. It starts for example with a Zigzag (wave W), then an intermediate X wave, then a Flat (wave Y) and so on. A so-called double or triple three is also a Combination, but this pattern combines Flats separated by X waves. Rules and guidelines - All types of corrective patterns can combine to form a bigger corrective pattern.
- The rules and guidelines, as mentioned for other corrective patterns apply.
- A triangle in a Combination should normally occur at the end.
- Corrective patterns in a Combination normally show alternation.
In which wave Generally a Combination occurs mostly in B, X and 4, it is less common in A and rare in 2. Internal structure For example a Zigzag, followed by a Flat, followed by a Triangle has the following internal structure: 5-3-5(Zigzag)-5-3-5(X)-3-3-5(Flat)-3-3-3-3-3(Triangle). f. Running Flat Pattern Description The Running correction is a rare special form of a failure. This pattern is a kind of Flat, with an elongated B wave and a very small C wave. According to theory wave C should be so short that it doesn?t get to the price territory of wave A. ELWAVE does not except a C wave that fails to reach the price territory of wave A. Instead of a running correction this could in theory be an extension in an impulsive wave, where the wave has subdivided in two (or more) 1,2 combinations. If the B is a clear three wave, then it is a Running correction, otherwise an extension. In practice there will not be any difference in market direction: in both scenarios the market will explode in the direction of the B wave, therefore ELWAVE prefers to label it as an extension. For the sake of correctness we have included this pattern, it has been implemented in the Classic Rules, not in the Modern Rules. Rules and guidelines - The B wave must be composed of three waves.
- The C wave must be composed of five waves.
- Wave C must be very short and normally will not reach the price territory of A.
- Wave C must not retrace more than 100% of wave B but more than 60% of wave A.
In which wave Most of the time it should occur in wave 2 or B. Internal structure It is a three-wave structure. The internal structure is 3-3-5. X wave Description An X wave is an intermediate wave in a more complex correction. This wave is always corrective and can take many forms like a Zigzag, Double Zigzag, Flat, Expanded Flat, combination and a triangle. |