the hAnDbook oF teChnICAl AnAlysIswave cycle. In fact, every wave cycle or wave degree may be broken down into yet
smaller wave cycles or subwaves. We call this phenomenon wave fractalization.
As we repeat this process, we find that the Elliott wave counts always add up to a
Fibonacci number. This unique underlying structure provides yet another way for
understanding and forecasting the behavior of the markets.
10.22.7 Fibonacci‐based time ratio projections
Fibonacci time ratio projections may also be employed to forecast when a reversal
may take place. Such projections are frequently performed on Elliott waves in
conjunction with conventional Fibonacci ratio analysis to arrive at a price‐time
forecast for the next reversal.
When performing Fibonacci time ratio projections, we first measure the dura-
tion of our reference wave, and set it to a base ratio of 1.000. We subsequently
calculate various Fibonacci‐based projection ratios to predict potential turning
points in the market. As always, it is best if these time ratio projections are in
the proximity of other supportive or resistive confluences, with corresponding
overbought or oversold indications in the oscillators. It is usually best that no
technical tool or indicator be used in isolation. A confluence or cluster of technical
indications around a particular price and time will generally lead to more reliable
forecasts. Fibonacci time ratio projections may be made from:
■ (^) Peak to Peak
■ (^) Trough to Trough
■ (^) Peak to Trough
■ (^) Trough to Peak
Figure 10.93 Elliott Wave/Fibonacci Wave Counts.