NEOWAVE LIBRARY
QUESTIONS & ANSWERS

Question of the Week: 6/26/2006

If the end of a correction occurs higher than the impulsion preceding it, how do you measure it for Fibonacci relationships?

Answer:

My good friend and long-term client, Paul Collaros of South Africa, sent in this question. To make discussing this topic easier, let’s assume the market is in an uptrend and the first impulsion is wave-1 and the second is wave-3 (the following concepts also apply if the first and second impulsions are waves-3 & 5 or waves-a & c of a Zigzag). In measuring the size of the two impulsive waves for possible Fibonacci relationships, Paul was wondering if you measure wave-1 from "Point 0" to its end OR if you include the high of the correction into the length of wave-1 before comparing it to wave-3.

This appears to be two questions in one...
1. How do I determine which wave is the extened wave?
2. Should I include part of the correction in the length of wave-1 before applying Fibonacci relationships?

First realize, if in a larger five wave move, the impulsion following a strong correction will always become the extended wave (unless the correction in question is a Running Triangle - i.e., a Triangle with a strong upward or downward slant). Therefore, based on our assumptions in paragraph one, the impulsion forming would be of the 3rd Extension variety (see top left corner of page 5-14 in MEW).

Addressing question 1 above, determining which wave extended has nothing to do with Fibonacci relationships, but simply with which wave is the longest when measured from its "orthodox" beginning to its "orthodox" conclusion.

Addresssing question 2, Fibonacci relationships may or may not exist between waves-1 & 3, but that will have no bearing on whether the pattern is impulsive or not. If you must add part of wave-2 to the length of wave-1 to find Fibonacci relationships, that is fine. If a Fibonacci relationship exists between waves-1 & 3 without using the high of wave-2, that is fine, also. Fibonacci relationships are less common in impulsive patterns; they are more corrective environments.

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