The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

ChAPter 18 Basic elliott Wave Analysis

L e a r n i n g OBj eCt i v e s

After studying this chapter, you should be able to:

■ Understand how to identify important market moves based on the Elliott wave principle

■ Describe the various motive and corrective patterns that commonly occur in equity and

commodity markets

■ Be familiar with the concepts of wave equality, alternation, and truncation

■ Understand the different wave personalities associated with motive and corrective

waves

■ Calculate the minimum price objectives for various wave targets

■ Distinguish between Elliott wave rules and guidelines

e

lliott wave analysis is widely used by institutional traders and analysts. The wave

principle provides traders and analysts with a unique way of understanding

market action, forecasting potential breakouts and significant reversals. This chap-

ter covers all the basics of Elliott wave analysis with various chart examples.

18.1 Elements of Elliott Wave Analysis

motive, impulsive, and Corrective Waves

The reader is strongly advised to refer to the original writings of Ralph Nelson

Elliott for a comprehensive and concise description of Elliott wave analysis. The

references are located at the end of this chapter. Readers are advised to refer

to Elliott Wave Principle by Frost and Prechter, which, in the author’s opinion,

represents the leading authority in the study and advancement of Elliott wave

analysis.

The basic construct of Elliott waves consists of a 5‐3 wave formation. This

simply means that for every advance in price that consists of a five‐wave move