the hAnDbook of teChnICAL AnALySISSome practitioners also define a trend by its ability to remain above or below
some arbitrarily chosen price level. As long as price remains above a chosen sup-
port level, an uptrend is considered to still be intact. Similarly, as long as price re-
mains below a chosen resistance level, a downtrend is considered to still be intact.
This chosen price level may represent some historically significant support level in
an uptrend—or resistance in a downtrend—the violation of which would imply a
very high probability of the trend reversing.
A third method of identifying an ongoing trend is via the absence of a re-
versal of a specified amount during a trend. This third approach is employed on
constant‐range charts such as Point and Figure and Renko charts. As long as the
reversal size is not breached, the trend is still intact. See Figure 5.4.
Describing Consolidation and trends via Wave Cycles
and Degrees
It is also important to be able to describe and identify trends and consolidations
in terms of wave cycles or degrees. We may describe any trend or consolidation
in terms of wave cycles, which exist at various wave degrees. Below are the terms
associated with a wave cycle comprising three degrees:
■ (^) Higher Wave Cycle (HWC)—highest wave degree relative to the MWC and
LWC
■ (^) Medium Wave Cycle (MWC)—a subwave of HWC and is of a lower degree
than the HWC
■ (^) Lower Wave Cycle (LWC)—a subwave of both the HWC and MWC and is at
the lowest wave degree
Note that the minimum number of wave degrees in any trend is two. Figure 5.5
depicts a wave of three degrees.
figure 5.4 Alternative Definitions of an Uptrend in Effect.