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Effect of Corrective Waves
Markets move against the trend of one greater amount only with a seeming conflict. Resistance from the greater trend appears to forbid a correction from establish a full impulsive format. The struggle between the two oppositely trending amount generally makes corrective waves less clearly identifiable than impulsive waves, which always flow with comparative ease in the direction of the one greater trend. As another result of the conflict between trends, corrective waves are quite a bit more varied than impulsive waves.
Corrective patterns fall into four main categories:
Zigzags (5-3-5; includes three variations: single, double, triple);
Flats (3-3-5; includes three variations: regular, expanded, running);
Triangles (3-3-3-3-3; four types: ascending, descending, contracting, expanding);
Double threes and triple threes (combined structures).
A single zigzag in a bull market is a simple three-wave declining pattern labeled A-B-C and subdividing 5-3-5. The top of wave B is noticeably lower than the start of wave A, as illustrated in Figures 1 and 2.
hardly zigzags will occur twice, or at most, three times in series, especially when the first zigzag falls short of a normal target. In these cases, each zigzag is separated by an intervening “three” (labeled Q), producing what is called a double zigzag (see Figure 3) or triple zigzag. The zigzags are labeled P and R (and S, if a triple)
A flat correction vary from a zigzag in that the subwave progression is 3-3-5, as shown in Figures 4 and 5. Since the first actionary wave, wave A, lacks sufficient downward force to unfold into a full five waves as it does in a zigzag, the B wave reaction seems to innerit this lack of countertrend burden and, not surprisingly, abolish near the start of wave A. Wave C, in turn, generally terminates just slightly beyond the end of wave A rather than somewhat beyond as in zigzags.
Flat corrections usually retrace less of preceding impulse waves than do zigzags. They participate in periods involving a strong greater trend and thus essentially always precede or follow extensions. The more strom the underlying trend, the briefer the flat tends to be. Within impulses, fourth waves frequently sport flats, while second waves barely do.
Three types of 3-3-5 corrections have been analyze by variation in their overall shape. In a regular flat correction, wave B terminates about at the level of the beginning of wave A, and wave C terminates a slight bit past the end of wave A, as we have shown in Figures 4 and 5. Far more common, however, is the variety called an expanded flat, which contains a price extreme beyond that of the preceding impulse wave. In expanded flats, wave B of the 3-3-5 pattern terminates beyond the starting level of wave A, and wave C ends more extensively beyond the ending level of wave A, as shown in Figures 6 and 7. In a rare variation on the 3-3-5 pattern, which we call a running flat, wave B terminates well beyond the beginning of wave A as in an expanded flat, but wave C fails to travel its full distance, falling short of the level at which wave A ended. There are hardly any examples of this type of correction in the record.
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TABLE OF CONTENTS
Candlestick and Chart Patterns (15 Days)
7 Most Important Candlestick Chart Patterns
- Gap Down Chart Pattern
- Gap Up Chart Pattern
- Gravestone Short-term Chart Pattern
- Hammer Candle Stick Chart Pattern
- Hanging Man Short-term Stock Chart Pattern
- Inverted Hammer Stock Chart Pattern
- Shooting Star Candle Stick Pattern
Top 2 Bearish Chart Patterns
Top 6 Bullish Chart Patterns
- Engulfing Line (Bullish) Chart Pattern
- Exhaustion Bar Chart Pattern (Bullish)
- Inside Bar Chart Pattern
- Island Bottom Chart Pattern
- Key Reversal Bar (Bullish) Chart Pattern
- Two Bar Reversal (Bullish) Chart Pattern
Indicators & Oscillators (12 Days)
Bullish or Bearish Indicators
Bullish or Bearish Oscillators
- Bollinger Bands Oscillator
- Commodity Channel Index (CCI)
- Fast Stochastic Oscillator
- Know Sure Thing (KST) Oscillator
- Momentum Oscillator
- Moving Average Convergence/Divergence (MACD) Oscillator
- Relative Strength Index (RSI)
- Slow Stochastic Oscillator
- Williams %R Oscillator
Classic Chart Patterns (29 Days)
Bearish Classic Chart Patterns
- Continuation Diamond (Bearish) Chart Pattern
- Continuation Wedge (Bearish)
- Descending Continuation Triangle Chart Pattern
- Diamond Top Chart Pattern
- Double Top Chart Pattern
- Downside Break Chart Pattern – Rectangle
- Flag Bearish Chart Pattern
- Head and Shoulders Top Chart Pattern
- Megaphone Top Chart Pattern
- Pennant Bearish Chart Pattern
- Rounded Top Chart Pattern
- Symmetrical Continuation Triangle (Bearish)
- Top Triangle/Wedge Chart Pattern
- Triple Top Chart Pattern
Bullish Classic Chart Patterns
- Ascending Continuation Triangle Chart Pattern
- Bottom Triangle Or Wedge Chart Pattern
- Continuation Diamond (Bullish) Chart Pattern
- Continuation Wedge Chart Pattern (Bullish)
- Cup with Handle Bullish Chart Pattern
- Diamond Bottom Chart Pattern
- Double Bottom Chart Pattern
- Flag Bullish Chart Pattern
- Head and Shoulders Bottom Chart Pattern
- Megaphone Bottom Chart Pattern
- Pennant Bullish Chart Pattern
- Round Bottom Chart Pattern
- Symmetrical Continuation Triangle Bullish
- Triple Bottom Chart Pattern
- Upside Breakout Chart Pattern – Rectangle
Best Trading Theories (4 Days)
- Basics of Dow theory trading strategy forecasts
- Motive (Impulse) Waves
- Corrective Waves
- Wyckoff Chart Reading
Kind attention: this course is helpful for beginner and intermediate traders. It’s free for everyone. Advanced modules, trading strategies, and data (in-depth) are available for Moneymunch’s premium subscribers.
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