ASX Charting Course


Chapter 33

The Elliot Wave Theory

Impulse Waves – Variations

Extensions

Any of the five impulse waves in one cycle, three up and two down, can result in an extension. Extensions are more common in wave five and three than wave one, but nevertheless can exists in any impulse wave. Not only primary impulse waves can extend but extensions within extensions can also exist, in the case of a telescopic type market.

Fig 46


The above diagram illustrates a fifth wave extension of a fifth wave extension, in descending magnitude. By the same token the same sort of extension within extension can exist in wave three, which is the next most common wave to make an extension.

Diagonal Triangles

These occur in the fifth wave generally as a result of the third wave going too far too fast. They borrow from the classic charting patterns of old and are essentially wedges, with each sub wave dividing into three. A rising wedge is bearish and often results in a sharp decline at least back to the inception point of the triangle began.

Fig 47

Failures
Elliot used the word failure to describe the failure of the market to make a new high (or low) as a result of the fifth wave. The fifth wave falling short of the third wave is a failure, which, is an exceptionally bearish signal.

Fig 48
Craig MacLean is a Futures Adviser Licensed under the Australian Securities Commission, Corporations Law. The writer accepts no responsibility for any losses incurred from any action or inaction derived from the advice in this report.