How to Measure Fibonacci Extensions in Elliott Wave Flat Corrections
|In the first place the point of measuring a Fibonacci extension is to get the area pinpointed that an Elliott Wave correction will move against the trend. The conventional thought is that the market will trend in impulses of 5, 9, & 13 swings. The corrections against the trend will move in 3, 7 or 11 swings. The exception to that is a stand alone triangle which is five sideways three swing cycles. Generally speaking I think you will see how these measurements are very simple and easy to do.
Uniquely, one thing price action in flats can do is trick the market into thinking a previous trend up or down has ended a cycle. Afterward, of the flat correction the prevailing trend resumes. In this article the focus will be on the three different types of Elliott Wave flat corrections. All of these descriptions and graphics are shown as corrections to a bullish trend. They can be applied to a bearish trend as well using them inversely.
Firstly you will need a Fibonacci extension tool on your chart platform. Go to the settings where you can adjust the measurement levels. Set it to show you the 61.8%, 100.%, 123.6% & the 161.8%. On into the first flat structure we will look at a regular flat structure that subdivides 3-3-5. Overall it is a 3 waves move labeled as ABC. The subdivision of wave A and B is in 3 waves and the subdivision of wave C is in 5 waves as an impulse or diagonal. The subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three or triple three. Wave B terminates near the start of wave A usually at about the 90% retracement.
Wave C generally terminates slightly beyond the end of wave A with momentum divergence. Measure the extension like this. On this chart, point 1 will be at the beginning upper left side. Presume a bullish cycle ended there. Go from there down to the wave A low as point 2. From there the point 3 will be at the top of the wave B. This will give the projected Fibonacci extension area for the wave C which can be only 61.8% however 100% or 123.6% of wave A & B is more common on up to 161.8%. Continued below the regular flat picture.
Secondly we will look at an expanded flat. This is a corrective 3 wave move labeled ABC in like manner as well as subdivides as 3-3-5. The subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three or triple three. As can be seen, Wave B terminates beyond the beginning of wave A usually about a 123.6% retracement of wave A. In addition Wave C generally terminates way beyond the end of wave A. It should show momentum divergence. The subdivision of wave C is in 5 waves as an impulse or diagonal.
Ordinarily the wave C will be 123.6% to 161.8% of wave A. This is measured in the same fashion as the aforementioned regular flat. Point 1 will be at the beginning upper left side. Presume a bullish cycle ended there. Go from there down to the wave A low as point 2. From there the point 3 will be at the top of the wave B. This will give the projected Fibonacci extension area for the wave C. Continued below the expanded flat graphic.
Lastly a running flat is a corrective 3 wave move labeled ABC that subdivides 3-3-5. The subdivision of wave A and B can be in any corrective 3 waves structure including zigzag, flat, double three or triple three. The subdivision of wave C is in 5 waves as an impulse or diagonal and terminates with momentum divergence.
Conclusion: In the final analysis, this type of flat wave B of the 3-3-5 pattern terminates substantially beyond the starting level of wave A as in an expanded flat usually around 123.6% retracement. In addition Wave C travels anywhere from 61.8% to 100% of the wave A. As a matter of fact. it will fall short of the level where wave A ended. Measurements are taken in the same fashion as previously mentioned. Point 1 will be at the beginning upper left side. Similarly presume a bullish cycle ended there. Go from there down to the wave A low as point 2. From there the point 3 will be at the top of the wave B. This will give the projected Fibonacci extension area for the wave C.
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