Technical Analysis Elliott Waves Part 4

Correction Patterns

• Recognizing correction waves is more difficult than recognizing impulse waves.

• There are more correction patterns than impulse patterns.

• Correction patterns have the tendency to develop more complex combinations. 

• The most important rule is that a correction wave of the same order can never have 5 waves.

• Only impulse waves have 5 waves.

• A correction consisting of a 5 impulse wave can therefore never be the end of that correction.
  

Zigzag

The zigzag pattern shown in figure 7.21 is the most common correction structure.

Special offer: "Capturing Profit with technical Analysis"

Figure 7.21: The zigzag pattern is the most common correction structure.

 

A zigzag can consist of one zigzag, a double zigzag, or, rarely, a triple zigzag. The zigzag belongs to the family of sharp corrections.

Rules and Guidelines

• A zigzag correction has three waves.
• Wave A is an impulse wave or a starting wedge impulse wave.
• Wave B can be any kind of correction pattern.
• Wave B is smaller than wave A.
• Wave C is an impulse wave or an ending wedge impulse wave.
• Wave C is not an ending wedge impulse wave if wave A is a starting wedge impulse wave.

A simple zigzag pattern has three waves. A double zigzag pattern has seven waves, two simple zigzags separated by an X wave. A triple zigzag has 11 waves with two X waves.

The structure of the three waves in a simple zigzag is 5-3-5 and 5-3-5-3-5-3-5 in a double zigzag.

Double and Triple Zigzag Patterns

We use WXY to denote a double zigzag, instead of the standard ABCXABC Elliott notation. For the triple zigzag, this becomes WXYX²Z.

Figure 7.22: Double zigzag pattern using WXY notation.

As you can see in figure 7.22, this is a more consistent way of notation because more zigzags of a lower order (ABC) are connected together by a higher order wave (XYZ).

Rules and Guidelines

• Wave W must be a zigzag pattern.
• Wave X can be any correction pattern, except an inverted broadening triangle.
• Wave X is smaller than wave W.
• Wave Y must be a zigzag pattern.
• Wave Y is, at minimum, equal or bigger than wave X.
• Wave X² can be any correction pattern, except an inverted broadening triangle.
• Wave X² is smaller than wave Y.
• Wave Z must be a zigzag pattern.
• Wave Z is, at minimum, equal or bigger than wave X².

Search the Internet

 

Elliott Waves Next -Previous -Part 1 -Part 2 -Part 3 -Part 4 -Part 5 -Part 6 -Part 7

STOCATA Stocks Technical Analysis HOME