Impulse wave pattern is the base of Elliott Wave Theory. The whole Impulsive wave in Elliott Wave Cycle is identified as an Impulse pattern which includes all other Elliott wave patterns. It is applicable for wave (1), (3), (5), (A) and (C).
When I say that “wave (3) and (C) is always an Impulse”, you must know what the Impulse actually is, and what are the rules and guidelines to justify a 5 wave’s move an Impulse. So, let me explain the pattern Impulse of Elliott wave theory with all its rules and guidelines
Impulse wave pattern set of five internal waves normally marked as 12345 or (i) (ii) (iii) (iv) (v) or by any other number format. Means an Impulse is consist of five internal waves 1, 2, 3, 4 and 5.
Formation of numerous waves can be seen if we look at real time chart of any script but we can not select any set of five waves of our choice as an Impulse.
There are definite rules, guidelines and Fibonacci calculations to justify a particular set of five waves as an Impulse Pattern.
Inner Wave (2) of an Impulse pattern can never retrace more than 100% of previous wave (1), means wave (2) can never be larger than wave (1), or wave (2) can never breach the start point of wave (1).
Wave (3) always project more than 100% of wave (1), means wave (3) is always larger then wave (1) within Impulse wave pattern. There is no maximum limit for projection of wave (3), means wave (3) can project 161%-461% or even 1000% of wave (1) but it can never be less than wave (1). Wave (3) don’t have any such relation with wave (5), means wave (3) can be either smaller or larger than wave (5).
Wave (4) can never overlap wave (1), means wave (4) cannot breach the end point of wave (1). End point of wave (1) or start point of wave (2) is the maximum limit for wave (4) to retrace.
Wave (5) always project minimum 38% and must complete beyond the end of wave (3). Means wave (5) can never be shorter than 38% Fibonacci projection in any case, or 38% is minimum limit for projection of wave (5). (If wave (3) is not extended then minimum projection for wave (5) is 61%, “Rules of extensions”). But there is no maximum limit for projection of wave (5).
Any one out of wave (3) or (5) must be extended. Both waves (3) and (5) can also be extended but “both waves (3) and (5) not extended” is impossible. If you are seeing that wave (3) is not extended then you must expect wave (5) to be extended (project more than 61%).
These are mandatory rules for identification of an Impulse. If the wave counts you are marking are breaching any of these rules then you are wrong somewhere at identifying the actual pattern.
Look at (Image 1) to understand the rules and guidelines of an Impulse Visually.
Suppose you are expecting a move on chart as wave (C) and you know that wave (C) is always an Impulse or have Impulse Pattern.
So, you must make sure that wave (C) is consist of five waves and this set of five waves is following all the rules explained above.
And if the set of 5 waves is not following any of these rules then either it is not wave (C) or you are wrong at marking the wave counts.
This is Axis Bank daily chart completed an Elliott Wave Cycle and the upside move from 369.05 to 423.80 is perfect example of Impulse Wave Pattern.
Wave (2) retraced 61%-78% of wave (1)
Wave (3) is not shortest and projected more than 100% with respect to (1). Wave (3) and inner wave (iii) of (3) is fastest of all waves (personality of wave 3).
Wave (4) retraced exactly 38% and didn’t overlapped wave (1)
Wave (5) projected more than 38% and completed above the end of wave (3). It is extended wave 5 (projected move than 61%).
Internal waves of (1) are not identifiable but wave (3) and (5) also have clear Impulse pattern.
This set of five waves and its internal waves is perfectly following all the rules and Fibonacci projections/retracements.
About Deepak Kumar
An independent Elliott Wave Theory analyst, trainer and trader. Analyzing Indian Indices and stocks since 2011. Founder of “Sweeglu Elliott Waves” and author of most practical book on Elliott Wave Theory, “Practical Application of Elliott Wave Principle”
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