You will hear much about trading patterns - cup and handles double and triple tops and bottoms, zig-zags, flags and pennants, expanding diagonal - the list is endless but they can all be explained using the 5 wave count! A few examples are shown below. Again from my early work originally published 29 April 2012.
Rising or falling Wedge or Pennant or expanding pivot formations.
If pivots are alternating as described above then a wedge pattern will form if wave 2 is complex and 4 simple as shown below on 2 time scales - blue 4Hourly pivots and the possibility of daily - purple pivots.
The opposite pattern will occur if wave 2 is the alternate simple wave, but worse how the hell do we decide if we only have 1?? That is why we need alternate target lines which will be discussed in the next part so we can establish entry and exit parameters with our probabilities!
Head and Shoulders, Triple and Double tops and Bottoms
Again with MAP Waves very clearly explained as seen below. The Same is true on most pivot scales! A triple top or bottom is also commonly used. A Double top or bottom is formed when one either wave 5 or -1 has a sub wave, or in an inverted head and shoulders waves -5 or 1 have a sub wave!
If you look at many chart on a longer timescale - on daily, weekly and even monthly pivot scales you can clearly see we are approaching some pretty big head and shoulders patterns! Scary if you are on the wrong side of the market!!
Bull and Bear Flags
These are 01234 wave formation where waves 2 and 4 are equal in size (as opposed to the rule of alteration described above). Below I show them on the S&P on a small and big picture view as arrow pairs - bear flags red, bull flags green.
This can be seen on a bigger pivot scale below and shows that there is an extremely high probability that we are nearing then end of the upwave on the monthly pivot scale, and technically may have seen the final high for a long time conforming to my MAP Waves. On smaller time scales however I still feel we have a final high to come later this year but that analysis is for another day - try it for yourself to practice waves within waves! CAN YOU SEE THE MASSIVE BEAR FLAG?
On the above chart we can clearly see a 5 wave formation where we have fulfilled the 5 wave validation criteria on that pivot scale! Also here we have a reverse wedge formation - wave 2 is simple and wave 4 is complex!