WAVE 2
Wave 2 is the first corrective wave of a five-wave structure. Wave 2 will correct the movement of Wave 1 but the correction must never retrace the entire Wave 1. Normally, it will retrace about 38.2 to 61.8 percent.
The corrective patterns often found in Wave 2 patterns are flats or zigzags. If Wave 1 is extended, the retracement of Wave 2 is about 38.2 to 50 percent of Wave 1. Sometimes Wave 2 may retrace as much as 78.6 percent of Wave 1, but it should not retrace more than 100 percent of Wave 1. In short, Wave 2 cannot make a new low. According to the Rule of Alternation, if the pattern of Wave 2 is a complex formation, then it can be anticipated that the pattern of Wave 4 will be a simple formation. If the formation of Wave 2 is a simple pattern, then it can be expected that Wave 4 will be a complex pattern.
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