FIVE WAVE UP.
WAVE B of 3 DOWN
Wave B of 3 is a bearish reaction to a completed bullish Wave A of 3 up. This is when bears still believe they can reverse that rally and push price to new lower lows. However, wave B of 3 is unable to break under the previous important low, a critical support established by wave 2 down.
After corrective wave B of 3 down is completed its lowest low marked by the red dot becomes the new main support level for the following corrective waves. If that new higher low established by the wave B of 3 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.
MAIN FEATURES
- Wave B of 3 down is subdivided into three subwaves a, b and c
- it is almost impossible to predict depth of a corrective move down in wave B of 3
- wave B of 3 may have an ugly structure with unclear subdivision
- wave B of 3 should terminate over the low of the previous correction in the wave 2 down
- wave B of 3 sets a new higher critical support for the subsequent correction in wave 4 down
The best way to understand how this pattern works is to study collection of charts with real life examples.
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