Eliott Waves are a strong tool because they provide a context for market analysis.
For Elliott, every impulsive move is followed by a corrective move. An impulsive movement is composed of five waves of lower degree, of which three are impulsive and two are corrective. The corrective movement is composed of three waves, two of which are corrective and one is impulsive.
We call the impulsive phase the motive phase, and waves are denoted by numbers. The corrective phase is made of waves denoted by letter.
The first wave represents the arrival of the precursors, those who anticipate the impulse.
The second is a very strong correction. This is the entry of the contrarians, who are not convinced of the impulse.
The third wave is that of the followers and professionals. It is a strong impulsive wave, the most powerful of the five waves.
The fourth wave corresponds to profit taking. Those who benefited from the third wave withdraw their gains, which leads to a correction, but does not call the trend into question.
The fifth wave corresponds to the entry of the laggards, who will surely be in loss because of the imminent reversal. Generally, technical indicators show divergences during this wave.
Status:: #wiki/notes/plantation
Plantations:: Technical Analysis
References:: The Elliott Wave Principle