Most investors guess at where price is going. I'll show you how to map it using Elliott Wave and Fibonacci confluence, the same framework I use on every setup I post.
The three corrections, and how to tell them apart
The three corrections, and how to tell them apartI see far too many Elliott Wave 'analysts' spot a three wave pullback and instantly label it an ABC correction. This couldn't be further from the truth. Often that three is only wave A, and the real correction has barely started. Luckily for you, I'll teach you the different correction types so you can tell them apart yourself. Not every pullback is the same. Guess the wrong type and you're early, late, or on the wrong side. You asked for this one, and in email two I promised to break the wave structure down properly. Zigzags, flats and triangles. How to recognise each one, where it ends, and how I trade it Zigzag, 5-3-5The most common correction in wave 2. Sharp, deep, and it feels like the trend has reversed. That is the point. It is built to shake you out. The structureWave A moves down in five waves. Wave B retraces up in three. Wave C moves down in five again. Wave BB typically retraces between the 0.5 and 0.786 fib of wave A. It cannot exceed the start of wave A. If it does, it was never a zigzag. You are in a flat, which is next. Wave CC usually equals wave A in length and often exceeds it. To project it, draw a Fibonacci extension from the start of A, to the end of A, to the end of B. The 1 fib extension is your most likely end point. If C is extending, look to the 1.618. Zigzag or flat?Two tells.
How I trade itA five wave move down from a top is wave A. That tells me the correction is not finished. C is still to come. So I wait for C. I want it landing on confluence:
When they cluster, I buy on support confirmation. Same process as email two. I do not buy the level. I buy the reaction to it. The B wave tradeYou can trade the bounce off the end of A. Same confluence logic, targeting the 0.5 to 0.786 retracement of wave A. Treat it as a trade, not an investment. It is counter-trend and short-lived, and C will take out the A low. Take profit in the B zone and do not hold for more. Flat, 3-3-5The sideways correction. Most common in wave 4. Where a zigzag feels like a reversal, a flat barely gives ground. That is a strength signal. The trend underneath is still in control. The structureWave A moves down in three waves. Wave B moves up in three. Wave C moves down in five. That first three is your early tell. A zigzag's A is a five. Three types, decided by wave B
Running flats are rare. If you think you see one, recheck your count before you trust it. A real one: $TE $TE is a textbook expanded flat. Wave A pulled back in three waves. Wave B went parabolic, straight through the start of A. Then wave C came down in a clear five waves. Subwave 5 of C is not fully complete yet. I expect one more new low towards the 0.786 fib at $2.83, marking a long term bottom for wave 2. A move below the start of wave 1 and the count is wrong. Flats are more common in wave 4, but they show up in wave 2 too. This is one. Look at wave B. Anyone who caught it from the A low made over 200% in two months. Anyone who bought it above the start of A, thinking the correction was over, then sat through wave C. Never underestimate wave B. It can be the best trade on the chart and the worst entry on the chart at the same time. A quick wordThat's two of the three. The textbook shape is the easy part. The hard part is calling it live, on your own chart, while price is still moving. Spotting a pattern in hindsight takes an afternoon. Calling it in real time, with money on the line, is a different skill. Keep that in mind for the last one, because triangles are the hardest of the three to call early. Triangle, 3-3-3-3-3Five overlapping waves, A to E, contracting into a tightening range. The upper and lower boundaries converge. Every wave inside is a three. Where it shows upAlmost exclusively wave 4 or wave B. That makes it useful beyond the trade itself. Spot a triangle and you have narrowed down where you are in the cycle. The thrustEvery triangle ends with a sharp thrust in the direction of the prior trend. Fast and aggressive. You can measure it. Take the widest part of the triangle, the distance from A to B, and project it from the breakout point. That is your target. Most people trade triangles on feel. This gives you a number. How I trade itSame process as a moving average in email two, for a wave 4 triangle in an uptrend:
Target is the thrust measurement. Take profit on the thrustThe thrust often marks the final wave of the larger structure. Out of a wave 4 triangle, the thrust is wave 5. Out of a B triangle, it is wave C. Either way the move is finishing. Take profit at the target. Do not expect continuation. Where you are wrong: price falls back inside the triangle and through the E low. The breakout has failed. Complex corrections, brieflyNot every correction finishes in a clean ABC. Sometimes two corrective patterns link together. The first is W, the connecting move is X, the second is Y. That is a double three. They are more common than most people realise, and they are the main reason correction counts keep breaking. The tell is simple. Your ABC completes. Price bounces. Then it rolls over and the correction keeps going. Stop forcing it. Relabel. The first sequence is W, the bounce is X, and you wait to see how Y develops. The biggest risk is not the pattern. It is buying the end of W because you were sure it was C. One guideline that ties it togetherWaves 2 and 4 rarely look the same. This is called alternation. If one is sharp and deep, the other tends to be shallow and sideways. If wave 2 was a zigzag, do not sit waiting for another zigzag in wave 4. Expect a flat or a triangle. And the reverse. If wave 2 dragged sideways, expect wave 4 to come down fast. So once wave 2 has formed, you already have a working expectation for wave 4. You know whether to wait for a sharp flush or a slow drift before your wave 5 entry. It is a guideline, not a hard rule. But it is one of the most overlooked tools in Elliott Wave. The checklistBefore I label a correction, I run through this. Answer in order. Each one narrows it down. Wave A
Wave B
Wave C
Shape
Position
None of this makes a call certain. It tells you which structure is most likely, where it should end, and where you are wrong before you put money on the line. Still here?Most people don't get this far. That tells me something about you. Remember the gap I mentioned halfway through, between spotting a pattern afterwards and calling it live? That gap is what my 1-1 tutoring is built around. I take on a small number of 1-1 students. A select few places. You learn to read a chart the way I read one, and to call it live on your own. It's the premium end. Priced accordingly, and there's homework every week. There's no launch post coming. No thread, no announcement. Just this, to the people who read to the bottom. If you're interested, reply. Your turnThis is email four. Tell me what you want in email five. Most requested topic wins. Drop a direct reply or a comment under any post with suggestions. Missed the last three? They're here: https://echoanalysis.kit.com/ Echo Analysis Everything above is my own analysis and my own positioning. It is not financial advice and it is not a recommendation to buy or sell anything. Do your own research and manage your own risk. |
Echo Analysis
Most investors guess at where price is going. I'll show you how to map it using Elliott Wave and Fibonacci confluence, the same framework I use on every setup I post.
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