The Elliott Wave lives on... :-)
According to physical law: "Every action creates an equal and opposite reaction". The same goes for the financial markets. A price movement up or down must be followed by a contrary movement, as the saying goes: "What goes up must come down"( and vice versa). Price movements can be divided into trends on the one hand and corrections or sideways movements on the other hand. In Elliott terminology these are called Impulsive waves and Corrective waves.
The corrective wave formation normally has three, in some cases five or more distinct price movements, two in the direction of the main correction ( A and C) and one against it (B).
Very important in understanding the Elliott Wave Principle is the basic concept that wave structures of the largest degree are composed of smaller sub waves, which are in turn composed of even smaller sub waves, and so on.
The Elliott wave principle is a form of technical analysis that attempts to forecast trends in the financial markets and other collective activities.
Rule 1: Wave 2 can never retrace more than 100% of wave 1.
Rule 2: Wave 4 may never end in the price territory of wave 1.
Rule 3: Out of the three impulse waves - 1, 3 and 5 - wave 3 can never be the shortest.
Now let's examine rule No. 2:Wave four will never end in the price territory of wave one. This rule is useful because it can help you set protective stops in anticipation of catching a fifth-wave move to new highs.
Happy trading
Mvh
Rump