Guideline on a Retest of a Wave

Guideline on a Retest of a Wave (b) after Completion of a Three-Wave Move

Given that I have discovered that the impulsive waves 1, 3, and 5 actually comprise three waves and not five, this guideline can become a key pivotal forecaster in your analysis. However, I have noticed different reactions after the completion of each three-wave impulsive wave.

The retracement after Wave (i) may see the Wave (b) hold and sometimes not. In most cases it will be retested, but if Wave (ii) is a Triple Three then it will be quite common for the retracement to be quite deep and beyond the Wave (b).

The retracement after Wave (iii) will never fully test the Wave (b). Occasionally it comes close, but will not move particularly close to the extreme. Even after the completion of Wave (v) and there has been a reversal, it is rare for the extreme of Wave (b) of Wave (iii) to provide any lasting reaction unless it is clearly a key swing high/low within the trend.

The retracement after Wave (v) almost always moves directly to the Wave (b). More than in any other position this can be relied upon in the vast majority of cases.

In the example in Figure 3.25 in the hourly USDCHF market we had a long move higher that came in three waves, this being the fifth wave of Wave (C). Within the Wave (v) the rally came in three waves, with Wave (b) just below 1.0600. After completion of Wave (v), price declined to the span of the Wave (b) and corrected higher. In fact this pullback reached higher to 1.0719. If we observe this market in a lower time frame, perhaps the five-minute chart, we should also be able to spot the Wave -b-of Wave -v-, which should have been the first target in the retracement.

Figure 3.25 A Return to the Prior Wave (b) of Wave (v) after the Completion of the Wave (v)

An example of this type of move is shown in Figure 3.26, which shows the decline in Wave efc in USDCAD shown in Figure 3.18.

Figure 3.26 A Return to the Prior Wave -b-and Wave (b) of Wave (v) after the Completion of the Wave (v)

Following the perfect move lower in five waves it can be seen that price quickly retraced to the Wave -b-of Wave -v-, corrected lower, and then rallied toward the peak of Wave (b) of Wave (v). This type of reaction is extremely powerful and occurs very regularly, and can set up the reversal structure very well.