Question of the Week: 8/15/2007
Must the 2-4 trendline be drawn across the END of waves-2 and 4 or across the lowest points of waves-2 or 4?
Asked by a customer in Madrid, Spain, this question is about channeling. Channeling is a great tool for locating the termination of waves-2 and 4 in an impulsive pattern.
Under NEowave, no part of wave-3 should break the 2-4 trendline (this rule is not part of orthodox Elliott Wave). This means wave-2 (under NEoWave) must always end AT or AFTER the point where price action touches the final 2-4 trendline. In addition, wave-4 must also complete AT or AFTER the point where some of its structure touches the 2-4 trendline.
If you follow the above rules, you will find yourself changing counts less often and the patterns you confirm tend to remain correct. If you don't adhere to these NEoWave rules, count changes will be more frequent, forecasts less accurate and the entire wave-counting process much more frustrating.
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