Question of the Week: 5/22/2006
When wave-4 is a Triangle, can any part "overlap" wave-1?
This question was sent in by Ranjan Chatterjee (location unknown). Like most of the questions in this forum, the answer depends on structural conditions. If a Terminal impulse is forming (where every leg is corrective), part of wave-4 must share some of the same price range (overlap) as wave-1 and/or wave-2 whether it is a Triangle or not. In a Trending impulsion (where 1, 3 & 5 or impulsive - 2 & 4 are corrective), no part of wave-4 will share the same price range as waves-1 or 2. But, there is a caveat. For price action to adhere to the above requirement, you must use cash data for all wave charts. Due to the deterioration present in Futures data over time, structural distortion occurs, creating the potential for "overlap" that is not present on a cash chart. To avoid structural misinterpretation, I always recommend wave analysis be done on cash charts.
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