Forex and major trend breakout 26. AXIOM business books awards, bronze drawing fibonacci retracements forex factory for my book! AXIOM Business Books Awards, bronze medal. Trend channels can be used to project price targets.
Most of the time Elliot waves of the same order can be isolated using trend channels. This is the case for impulse waves, zigzag correction waves, and triangles. If these patterns are not moving within a trend channel, it is likely that the Elliott count is wrong. That is why all further wave subdivisions also are Fibonacci numbers.
The most common, wave1, the start of a new impulse wave, retraces between 23. 26: Price target for wave 1. 27: Price target for wave 2. 28: Price target for wave 3. 28, once correction wave 2 is completed, you can draw an uptrend line from the start of wave 1 through the end of wave 2. Next, you draw a parallel line with this trend line through the top of wave 1. Now you have a trend channel.
The upper side of this channel is the first price target for wave 3. If the price does not reach the upper side of this channel anymore, you probably are looking at a wave C, not a wave 3. You should keep a horizontal support through the endpoint of wave 2. If the price falls through this level, wave 2 is not finished and will become more complex, and wave 3 has not yet started. Impulse wave 3 often is the wave with the biggest move.
So, usually, wave 3 will move up above the trend channel. In a rising impulse wave, it is common for the price to reach 161. In a falling impulse wave, wave 1 usually will reach 123. At the end of wave 3 in figure 7. 29, you can draw a trend line through the tops of waves 1 and 3.
Now draw a parallel line through the bottom of wave 2. You now have a trend channel of which the lower side is the primary target for wave 4. Not reaching the lower side of this channel probably means that there is a strong trend and that you are still in wave 3, or there is only a short wave 5 to be expected. 29: Price target for wave 4. Looking at Fibonacci levels, wave 4 usually retraces back to 23. Most of the time, this will be in the price area of sub-wave 4 of impulse wave 3. Price Target for Wave 5 Quite often you will see a wave 5 that is equal to wave 1, or 61.
30: Price target for wave 5, method 1. At the end of wave 4 in figure 7. 30, draw a trend line through the end of wave 2 and wave 4. Draw a parallel line through the top of wave 3. The upper side of this trend channel is the target for wave 5. However, most of the time, this target will not be reached by wave 5, except when there are extensions in the making of wave 5, or when wave 3 was weak with just a moderate move.
Usually, wave 3 has the highest acceleration compared to waves 1 and 5. 31: Price target for wave 5, method 2. If wave 3 makes a bigger, sharp up-move like in figure 7. 31, draw the basic trend line through the end of waves 2 and 4, but draw the parallel line through the top of wave 1. Price Target for Wave B Wave B in a zigzag correction mostly retraces 38.
An inverted widening triangle retraces commonly 61. Price Target for Wave C Wave C will, many times, equal wave A. Wave C is a minimum 61. Forex and major trend breakout 26.