Traditional technical-analysis chart patterns fit within the broader framework of the Elliott wave model.
Elliott
waves subsume head and shoulders tops and bottoms, rounding tops and
bottoms, triangles, rectangles, double and triple tops and bottoms,
diamonds, falling and rising wedges, pennants and flags.
Let’s
take just one example: the head and shoulders top. The excerpt below,
from Elliott Wave Principle, shows how it fits within the Wave
Principle:
In
a normal wave development, wave five of 3 and wave 4 form the “left
shoulder” of the pattern, wave 5 and wave A form the “head,” and wave B
and wave one of C form the “right shoulder.” Wave two of C creates the
return to the neckline that is typical of the pattern (below).
So,
if you’re a fan of traditional technical chart patterns, the Wave
Principle can consolidate them under a single model and help you
determine which formations are most likely of real significance. To learn more about Elliott wave analysis, read the definitive text on the topic -- it’s free. |