WAVE 3
Wave 3 is the most forceful wave of the three impulse waves. Wave 3 is never the shortest wave of the impulse waves. Its slope is almost always steeper than Wave 1 and is accompanied by heavy volume and strong momentum readings. Very often, a price gap will occur in the middle of the wave movement, which helps to identify such waves. (See Figure 4.4.)
FIGURE 4.4 Wave [3] shows the subdivision of another five-wave structure. Notice the oscillator readings of Wave (4) and Wave [4], both of which show the momentum oscillator falling below the zero line.
When Wave 3 is not extended or is not the longest wave, then either Wave 1 or Wave 5 will be shorter than Wave 3. If Wave 1 is longer than Wave 3, then Wave 5 will be the shortest wave. If Wave 5 is the extended wave, Wave 1 would then be shorter than Wave 3. Wave 3 is the most likely wave to extend. When Wave 3 extends, the probable target could be as high as 1.618 or 2.618 of Wave 1 measured from the low of Wave 2, making it the most profitable wave to be in.
Get Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
