Knowledge Base
Subwave ( c ) of ( iii ), the strongest part of the Five Wave fractal
In any Five Wave up fractal wave ( iii ) up is the strongest part of the rally. Similarly in any Five Wave down fractal wave ( iii ) down is the strongest part of the decline. Wave ( iii ) is subdivided into three subwaves labelled as ( a ) , ( b ) and ( c ). Subwaves ( a ) and ( c ) drive price in direction of the trend while subwave ( b ) is a countertrend move, a temporary pullback.
Subwave ( c ) is always stronger than subwave ( a ). The size of subwave ( c ) should be bigger and teh slope of ascent should be steeper in comparison to preceding first leg of the rally in subwave ( a ) up.
Size of subwave ( c ) directly relates to the size of subwave ( a ) by several commonly repeated ratios. In particular, the most common extensions are:
( c ) of ( iii ) = 123.6% x ( a ) of ( iii );
( c ) of ( iii ) = 176.4% x ( a ) of ( iii );
( c ) of ( iii ) = 223.6% x ( a ) of ( iii ).
Very often you are tempted by the market to prematurely call the top of subwave ( iii ). And in many cases that would be a temporary top of micro wave iii inside five micro waves of subwave ( c ) of wave ( iii ) up. Always remember that subwave ( c ) of wave ( iii ) has to have an impulsive structure. The rule of thumb is “You can not consider it having completed until you can get five micro waves inside that wave labelled as i, ii, iii, iv and v.” In addition, that deceptive top very often will top at 100% extension of subwave ( a ) of wave ( iii ). That extension is inadequate for of the larger wave ( iii ) up. It has to stretch higher, at least to 114.6% of subwave ( a ) but better to 123.6% extension.
Another very important feature of subwave ( c ) of wave ( iii ) up is a gap up. After a temporary pullback in corrective subwave ( b ) down of wave ( iii ) up price resumes its move higher and whet it approaches a top of subwave ( c ) of wave ( iii ) it may jump over that level. Normally that happens when price closes one day right at the resistance created by the top of subwave ( a ) of wave ( iii ) and the following morning the price opens over that level leaving a “gap” on the chart.
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