More on Impulsive Patterns

Further to the previous post there are a few more items relating to impulsive patterns
that are worth noting.

Truncated (Failed) 5th Waves

Whereas the termination point for a 5th wave of an impulse is usually above the
termination point (in a rising market) of a 3rd wave, there are times when we have what
is known as a 'truncated' or 'failed' 5th wave. In this case the 5th wave will terminate at
or below the termination level of the 3rd wave (see diagram below).

This event will occur when the trend has 'lost steam'. The following corrective pattern
will often in these cases be quite large.

Throw-overs and Throw-unders in Diagonal Patterns

In all diagonal patterns whether impulsive or corrective an event called a 'throw-over' or

'throw-under' will often occur. The throw-over occurs when the market thrusts up
through the upper boundary of the wedge (in the case of a rising market) and a throw-
under occurs when the market does not have the strength to make the upper boundary
of the wedge pattern (refer to diagram below). This event will often happen in the final
leg of the pattern.

All of the above nuances in the pattern will provide an insight into the remaining
strength of the market cycle and what may occur as a following pattern.

Channelling of Impulse Waves

A very common event in the formation of Impulse waves is the channelling effect. This is
a common effect used in traditional TA for measuring the strength of a trend.
The above effect can often allow an EW analyst to determine the approximate levels for
the terminations of waves 4 and 5 once the first three waves have terminated.

Zigzag Corrective Patterns

Probably one of the most common patterns in the market cycle is a Zigzag corrective
pattern. It is a 3 wave corrective pattern having the form 5-Cor-5. Some analysts say
that the structure is a 5-3-5 structure but that is incorrect because the second leg can be
any corrective pattern (including a 5 wave corrective pattern). The details of a Zigzag
are in the diagram below.
Zigzags are so common that they can form parts of other complete patterns. For
example a simple Impulse wave can seen as being a combination of two Zigzags.

For the above reason if a trader is uncertain whether a Zigzag pattern or an impulse
pattern is forming, he/she can still trade the pattern because the 3rd wave of the pattern
will in most cases be at least the same range as the first wave of the pattern.

Wave equality in waves A and C of Zigzags are very common and allows traders to
assume target levels for the termination of wave C with a reasonable degree of accuracy
on many occasions.
Zigzag Rules

Following are some rules for the formation of Zigzags.

1) Wave A must be either an impulse wave or a leading diagonal

2) Wave B must be a corrective wave.
3) Wave B must be shorter than wave A in price
4) Wave C must be an impulse wave or an ending diagonal
5) If wave A is a leading diagonal then wave C cannot be an ending diagonal

Following are some guidelines applicable to Zigzags

1) In order of likely occurrence wave B (in terms of price) will have a range of 38.2%,
50% or 61.8% of the range of wave A
2) Wave C is most likely to have the same range as wave A. The next most likely ranges
for wave C are 61.8% or 161.8% of the range of wave A
3) If the range of wave C is longer than 161.8% of the range of wave A then the pattern
is more than likely to end up being an impulse wave rather than a zigzag.

FLAT CORRECTIVE PATTERNS

It's probably an appropriate time to discuss Flat corrective patterns. As shown in the
diagram below there are 3 different kinds of Flat corrective patterns, namely the
Regular, Expanded and Running Flat.
We can clearly see that in a Flat pattern the termination level of wave C is somewhere
near the termination level of wave A. So it is clear that this type of corrective pattern
does not retrace as much of a preceeding trending pattern as does the sharper Zigzag
pattern. The reasons for it being called a Flat pattern to me appears to be rather
obvious.

As it doesn't tend to retrace as much of the trending market as some corrective patterns
it can often occur in a strongly trending market and also can occur before an impulse
wave extends.

Whilst a Zigzag has the normal structure of a 5-3-5 pattern, the Flat normally has the
structure of a 3-3-5 pattern. Note that in both patterns the final pattern is a 5 wave
impulsive pattern hence it can be either an impulse wave or an ending diagonal.

It is because these corrective patterns always end in a 5 wave impulsive pattern that
many EW traders will trade the final C wave of these patterns.

I should stress at this time that the above 3-3-5 structure is what you will find is the
structure defined in all EW books however I personally will still consider a corrective
pattern to be a Flat pattern if it has the general shape shown in the diagrams above as
long as they have the structure Cor-Cor-5.

I believe that it's important not to be too pedantic about EW patterns. If it is a simple 3
wave corrective pattern that is sharp then I call it a Zigzag and if it is flat in appearance
then I call it a Flat.

Whilst the Standard Flat is fairly common, probably the most common flat pattern is the
Expanded Flat. As can be seen its B wave is longer than its A wave and the C wave is
longer again.

The least common flat pattern is the Running Flat. Here the B wave terminates well
beyond the beginning of the A and the C wave will not travel its full range.

Triangle Corrective Patterns

Whereas corrective patterns are often thought of as 3 wave patterns the black sheep of
that mold is the triangle corrective pattern which is a 5 wave pattern. Naturally enough
as we have both bull and bear market trends they can come in all sorts of different
shapes and sizes.

They can be symmetrical, ascending, descending, contracting and expanding.

Somewhat similar to the flat pattern, triangle patterns have a tendency to not retrace
the current trend dramatically. In my view this once again tells you something about the
strength of the trend. One could consider the triangle pattern a sort of consolidating
pattern within a trend.

Some of the variations to the triangle pattern are shown below. Note again that we have
contracting and expanding triangle scenarios.

Contracting Triangles

First of all we have the Symmetrical Triangle. Note the 5 wave labeling of the legs in
this pattern. The upper and lower boundaries are symmetrical about the horizontal
plane.

The next is the Ascending Triangle. The lower boundary is ascending whilst the upper
boundary is horizontal. The same wave counts apply in this case.
The next is the Descending Triangle. The upper boundary is descending whilst the
lower boundary is horizontal.
Expanding Triangles

Similar patterns occur which are of the expanding variety. I will only show the
Symmetrical expanding triangle but obviously there would be other expanding triangle
types similar to those in the contracting variety.

Robert Prechter states that a triangle always occurs in a position prior to the final
actionary wave in a pattern of one degree higher (eg, wave 4 of an impulse or wave B of
an ABC corrective pattern).

Note that the structure of a triangle corrective pattern is 3-3-3-3-3. Note that the "throw
overs" and "throw unders" mentioned for the 5th leg of the leading and ending diagonal
patterns also frequently occurs in the E leg of a triangle corrective pattern. It is virtually
a 'blow off ' type of price action in these type of patterns.

It should be noted that by far the most common triangle corrective pattern is of the
contracting variety.