Ambiguous Projections

Ambiguous Projections in Wave (c) of Wave (i)

The start of a new five-wave sequence can cause some confusion on occasion. The issue is to identify the Wave (a), (b), and (c) that make up the first Wave (i). Occasionally what appears to be a straightforward first structure isn't quite so obvious.

Figure 5.6 displays the end of what was considered a possible Wave (b) of Wave (iii) and the subsequent rally. The call for a rally was correct, but there was a problem in identifying the Wave -iii-. It can be seen that an initial rally was counted as Wave -a-with an Expanded Flat Wave -b-, followed by a Wave -c-that ended at a wave equality target. This was followed by another Expanded Flat Correction, this time in Wave -ii-.

Figure 5.6 The Start of a New Five-Wave Sequence Higher in the Five-Minute USDJPY Market

Taking the normal type of projections of 176.4%-185.4% and 261.8%-285.4% I have marked on the chart the 176.4% and 285.4% projection areas. Price stalled close to the 176.4% but nowhere close to the 285.4%. Could it be assumed that the peak where I have labeled Wave -iii-is correct? Well, a 76.4% projection from the Wave -iv-does end just about at the final peak. However, there is a problem with this structure. Wave -ii-was around a 38.2% retracement of Wave -i-and the labeled Wave -iv-is just under a 23.6% retracement. Although alternation is only a guideline it does raise the question whether this is a valid wave count.

Let us take a look at the start of the rally again (Figure 5.7).

Figure 5.7 The Start of a New Five-Wave Sequence Higher in the Five-Minute USDJPY Market

Figure 5.7 displays the same chart but with a change to the positions of Wave - i-and Wave -ii-. Taking further measurements and on the assumption that the Wave v of Wave -a-was an extended (wave equality) move, a 114.6% projection in Wave -c-came exactly to the new Wave -i-peak. Then taking a 176.4% projection in Wave -iii-it came precisely to the final peak at 93.38.

The expectations must be for a deeper Wave -iv-and probably a full 58.6% retracement before the Wave -v-can develop.