Difference Between a Modified Impulsive Wave and a Triple Three

Identifying the Difference Between a Modified Impulsive Wave and a Triple Three

On the occasions I have mentioned my findings to others, a frequent question is how to spot the difference between a modified impulsive wave and Triple Three. While there will always be occasions when it is harder to follow a structure, in the majority of instances they are quite simple to identify. There are several key issues to note. While there is no single 100% solution for this, there are guidelines that identify the difference in the majority of cases:

Triple Threes must develop as a corrective wave: Wave (b), Wave (ii), Wave (iv), or Wave (x). Therefore reference to the structure of the next higher wave degree is of utmost importance.

While Waves (ii), (iii), (iv), and (v) have relationships with each other, the three groups of ABC waves in a Triple Three rarely have relationships between them.

While even impulsive waves can get quite complex, it is far more common for Triple Threes to display a high level of complex structures.

I shall provide one example of how this should be watched.

Figure 3.15 displays the hourly market in EURJPY in which there appears to be a five-wave rally from 121.05 to 127.89. This is followed by a decline in three waves. At this point with the correction being in three waves we cannot be certain whether this is a complete Wave (B) or Wave cxa of a complex correction.

Figure 3.15 A Five-Wave Rally Labeled Wave (A) Followed by a Three-Wave Decline

Therefore, as the rally from the 123.42 low develops it will be important to watch for evidence of either the development of an impulsive structure or a corrective structure that could develop as a Triangle, Flat Correction, or Expanded Flat Correction.

Figure 3.16 displays the rally seen from the Wave (B) (or Wave CXA) low. While it would be simple to say that all wave structures are obvious from the wave relationships, it is not uncommon for there to be a degree of uncertainty where there are perhaps two projections of Wave -a-that match with subsequent peaks.

Figure 3.16 Breaking Down the Rally from Wave (B) to Identify the Structure

However, in the case that this rally will become a larger Wave (C) and will therefore end above 127.89, the Wave (i) must be of a suitable degree that would imply a strong wave (iii) projection should end close to or preferably above 127.89. In this example there was a very close relationship between the first Wave -a-and the Wave -c-so that we could consider labeling this peak as a potential Wave (i).

The correction was very shallow, stalling just above the prior swing low that would be Wave iv of Wave -c-. The move to new highs would imply that Wave (a) of Wave (iii) or a second ABC move is developing. This rally was quite ambiguous, with the impulsive structure having a truncated Wave -v-, while for the -a-, -b-, -c-move to hold more accurate projections the Wave -b-must be considered to have developed in an ascending Triangle.

Therefore, at this stage the apparent cleaner look would favor a rally in Wave (a) of Wave (iii). However, the truncated Wave -v-and the better relationship between the alternative Wave -c-to Wave -a-provided an uncertainty to the entire structure. This implies that close scrutiny of the following rally to identify whether this will be a five-wave move in Wave (c) or a three-wave move in a third -a-, -b-, -c-to complete a Triple Three must be undertaken. This latter alternative will imply that the pattern will probably be a Flat Correction with a final stalling point close to the 127.89 high or an Expanded Flat Correction that adheres to common expansion ratios.

The depth of the decline from the (potential) Wave (a) high was exceptionally deep. This could still hold within an impulsive rally as Wave (ii) was exceptionally shallow, so there was potential for this to be a deep Wave (b).

From this point there must be a clear distinction to establish whether a Wave (c) will develop to complete Wave (iii) or whether there will be a third -a-, -b-, - c-move. Price recovered sharply and then saw a deep pullback. (The rally is labeled Wave -i-or Wave -a-and the correction as Wave -ii-or Wave -b-.) Attempt should be made to establish whether the rally developed in five waves or three. Looking at the rally from the Wave (b) or Wave -x-low there is a sharp initial move followed by a brief correction and then a stronger follow-through to a peak that is labeled Wave -i-or Wave -a-. It certainly looks like three waves in this time frame (15 minutes) but what appears to be Wave (c) is so sharp it could hide the true nature of the structure.

If it remains unclear then the labeling should continue to be “Wave -i-” or “Wave -a-” and the subsequent rally should be observed. The confusion will be that a five-wave rally will be expected in both alternatives, either as Wave -a-of Wave -iii-or in a Wave -c-. The end of this rally moved to a marginal new high but below the high in Wave (A) in Figure 3.15 at 127.89.

From this point there are two alternatives. Either the decline will be a correction in Wave -b-of Wave -iii-or the implication of a retracement of more than 50% of the Wave -a-will suggest the rally is complete and it can be safely assumed that this had been a Triple Three, and therefore a return to the Wave (B) low will occur in a possible Flat correction.

This example reflects an uncertain outcome as the structural development from the Wave (B) low was unclear. However, in the majority of cases it is normally possible to note one of several factors that will reveal the true nature of the move:

Not only was the assumed Wave (ii) shallow but also Wave (b) of Wave (iii) and Wave (iv). Occurrences of limited pullbacks point to the structure more likely being a Triple Three.

The relationships between the three ABC moves (that is, the anticipated Waves (i), (iii), and (v)) were not harmonic, which again suggests this is more likely to be a Triple Three.

The projection in the anticipated Wave (iii) would not be deep enough to satisfy a Wave (v) that would match with a projection in the Wave (C) of the higher degree.