Elliott Wave Theory

 Elliott Wave Theory

Elliott Wave Theory uses Fibonacci retracement (e.g., 38.2%, 50%, 61.8%) and extension levels (e.g., 161.8%) to predict price targets and correction depths within its 5-wave impulse and 3-wave corrective cycles. These ratios help define potential support/resistance zones for waves 2, 4, A, B, and C, and project extensions for waves 3 and 5. 

Common Fibonacci levels in Elliott Wave (relative to prior waves)

·         Wave 2 (Retracement): Often 50%, 61.8%, 78.6% of Wave 1.

·         Wave 3 (Extension): Often 161.8% (or 261.8%) of Wave 1.

·         Wave 4 (Retracement): Often shallower, e.g., 23.6%, 38.2%, or 50% of Wave 3.

·         Wave 5 (Extension/Equality): Often targets 100% of Wave 1, or 61.8% of Wave 1+3 (or inverse 1.236-1.618 of Wave 4).

·         Corrective Waves (A-B-C): Wave B often retests 50-61.8% of A; Wave C often equals Wave A or is 1.618x Wave A. 

 

RULES :

1.      WAVE 2 SHOULD N’T GO LOWER THEN WAVE 1.

2.      WAVE 4 SHOULN’T TOUCH WAVE 1.

3.      WAVE 3 ISN’T SHORTEST (IT IS LONGEST MAX. TIMES). IT SHOULD BREAK WAVE 2 HIGH.

4.      WAVE 2 AND WAVE 4 ARE ALMOST OPPOSITE IN NATURE BUT BOTH GIVE RETRACEMENT.