Extended Wave Examples

Extended Wave Examples

In Chapter 3, I covered examples of how Elliott's extended wave appears to be a misjudgment of the real underlying harmonic structure. In Figure 3.8 I provided the example of a rally in GBPUSD and provided the harmonic wave count (shown in Figure 4.7).

Figure 4.7 A Five-Wave Rally in the Hourly GBPUSD Market

Table 4.2 provides the ratios in all waves.

The extremely close correlations of the key waves are highlighted, with all projections and retracements being linked to Fibonacci ratios. Such ratios can provide extremely precise targets, or if the structure has been complex then identification of exactly what has occurred once that part of the structure has been completed. Above all, it generates more confidence in understanding each section of the structure and leaves fewer instances where subjective judgment needs to be applied.

Also in Chapter 3 I provided an example of a harmonic version of a stronger extended wave (shown in Figure 4.8).

Figure 4.8 A Five-Wave Decline with a Strong Extended Wave -iii-in Five- Minute USDCHF Market

In this example the wave relationships are exceptionally accurate (as shown in TableAB). It is very important to note how the internal ABC relationships confirm the projections of Waves -i-through Wave -v-. In addition, while not shown, the end of Wave (c) at 1.0434 should also be a close relationship with that of Wave (a).

Table 4.3 Wave Relationships for the Five-Wave in Figure 4.8

These fractal relationships across the entire wave structure of all degrees is very noticeable and, in my mind, is conclusive proof that R. N. Elliott (probably quite understandably) made an error of judgment when defining the five-wave impulsive structure.

As a second example of a clearly extending Wave (iii), in Chapter 3, I offered the hourly chart of a decline in Wave (c) in what I considered then to be Wave (iii).

Figure 4.9 displays the same chart as provided in Chapter 3 as an example of an extended wave and also one with a deep Wave (b). The key to identifying the harmonic structure is in synthesizing the different fractal elements of the entire wave. Each impulsive wave must have a projection in Wave (c) that is a normal ratio of Wave (a). Waves (iii) and (v) must in addition have targets from extensions of Wave (i) and Wave (i) to (iii) respectively.

 Figure 4.9 A Five-Wave Decline in Hourly EURUSD with an Effective Extended Wave (iii)

Table 4.4 shows the harmonic fractal nature of the modified structure and in general holds quite accurate targets throughout. Note the deep Wave (b) of 61.8% but which slots in nicely with the projection in Wave (iii). Both Wave (ii) and Wave (iv) were modestly shallow at 41.4%. While the final 50% projection in Wave (v) is not uncommon, it is not one that I usually look for but should be considered if there is a discrepancy with the targets of one higher degree. In this case the larger Wave (c) lower displayed was a normal extension ratio of Wave (a) and also of Wave (i).

Table 4.4 Wave Relationships for the Five-Wave Decline in Figure 4.9