Extended Fifth Waves

Extended Fifth Waves

Similar to extended third waves, extensions in fifth waves do not require a change in the basic structure but merely reflect a longer than normal distance covered by the (a)(b)(c) structure. In my experience I tend to find these more to be aggressive and sudden moves rather than the more steady development seen in third waves.

Figure 3.12 displays how this would look in a bullish structure. Note the normal development of the first four waves. They will usually contain an element of alternation and the normal projections expected in such a structure. However, the Wave (v) develops more robustly and extends by more than the distance from the start of Wave (i) to the end of Wave (iii).

Figure 3.12 Development of an Extended Wave (v)

In these circumstances such a move tends to cause market analysts to expect the trend to continue. In the middle of the shock of such a move it is difficult to be 100% certain of the analysis as such a sharp move momentum often remains over-extended without a divergence.

Figure 3.13 displays a three-wave decline in Wave (v) in the five-minute chart of USDCHF. Within Wave (c) the Wave -v-extended and was more than the decline from Wave (b) to the bottom of Wave -iii-.

Figure 3.13 A Three-Wave Decline in Five-Minute USDCHF with an Extended Wave -v-of Wave (c)

While I will cover the wave relationships in Chapter 4, the important clues to identify the potential for an extended fifth wave come from the rest of the structural development. The harmonic structure will provide common extensions in both Wave (v) and in Wave (c) of Wave (v). If this is also the end of a Wave (C) of one higher degree there will be targets for this too. The key is to identify the high-risk areas that are implied by all projected target measurements.