Subwave A of Wave 3 up
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FIVE WAVE UP.

WAVE 4 DOWN

Wave 4  is a bearish reaction to a completed super strong rally in Wave 3 up. Every completed bullish A-B-C fractal gives birth to a corrective A-B-C move in opposite direction. In majority of cases Wave 4 down is unable to retrace more than 50% of the preceding rally in wave 3 up.

Wave 4 can be structured as any type of Corrective Waves.

After corrective wave 4 down is completed its lowest low marked by the red dot becomes a new main support level for the following corrective wave B of 5. If that new higher low established by the wave 4 gets violated by the next corrective wave we say that the five wave up structure gets invalidated because one of the formal rules is broken.

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The best way to understand how this pattern works is to study collection of charts with real life examples.

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