The Elliott Wave Principle says that all corrections happen in three waves, typically labelled ABC.
Ralph Nelson Elliott, the architect of the Elliott Wave Principle, suggested that at least one wave in a five-wave sequence is likely to be an extended wave.
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Robert Prechter , publisher of The Elliott Wave Theorist, heartily concurs that the market was ripe for a short-term rally, but that its longer term prospects are dim.
It will be of interest to readers that Wave C was exactly equal to Wave A. Once again, this fits in with the Elliott Wave theory that says alternate waves in a correction tend to be related by a Fibonacci ratio, and 100% is a key number.
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The first Elliott Wave chart shows why Apple is pausing here, at the 38.2% Fibonacci retracement level of the prior down move.
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Without invoking the esoterica of Elliott Wave analysis, the rally from March 2009 to April 2010 was followed by a correction to June.
One of the rules of Elliott Wave Principle is that wave 4 should not trade below the top of wave 1.
There are countless strategies, indicators and systems that are mentioned in the popular press with such catchy names as the January Indicator, Dogs of the Dow, Elliott Wave Theory, Dow Theory, Sell in May and Go Away, and the Fed Model.
Yes, the same Fibonacci numbers that provide the basis for Elliott Wave technical analysis.
One of the most effective tools for timing the trade is Elliott Wave Analysis.
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The good news for Best Buy bulls is that Elliott Wave analysis of Best Buy suggests that the tide could be changing.
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As per Elliott Wave theory, the third step down is often related to the first wave.
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There are many interesting Elliott Wave patterns along the way, and these are illustrated below, but we should start with a bigger picture with a little Fibonacci analysis.
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In its most simplistic level, Elliott Wave theory says that the main trend consists of five waves.
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Let us take a look at the chart patterns for the movements from the 2012 highs, and see whether Elliott Wave analysis could give us some clues.
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According to Elliott Wave Theory, one of the three impulse waves in a five wave movement will likely be an abnormally long (or extended) wave.
The relationship between alternate waves is well established in Elliott Wave literature.
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Elliott Wave analysis suggests that not only will the correction be sharp, but it will go deep and can potentially reach the minor wave ii within the fifth wave.
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The reason why some of us are enthusiastic users of Elliott Wave analysis is because it allows us to take into account new information as it becomes public knowledge.
Donning my Elliott Wave hat, I took a quick look at the chart, and some interesting patterns showed up.
Another concern is that no two Elliott Wave analysts seem to be able to agree on a count of the waves, and they seem quite willing to change their counts as the market moves.
Elliott Wave Principle suggests that when a five wave move finishes, we should expect a recovery back to the prior fourth wave level.
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