by m.tamosauskas| November 8, 2013 | No Comments
One of the main Elliott Wave Theory rule says: wave 2 cannot retrace more than a fib. 100% of wave 1. It is allowed to erase all the gains/losses of wave 1 but it is not expected to create a new price extreme. The most common retracement level for wave 2 is a fib. 61.8% ratio, however, sometimes it does more, like 76.4% or 85.4%. I am pretty sure you have seen those examples in a real time trading but a 100% retracement level is really something special and rare, so it is worth to share such an example!
Yesterday DJ Utilities Average Index retraced exactly a fib. 100% of the preceding decline (510.40-467.90). The counter-trend advance from the 467.90 low is composed of three waves and is labelled a–b–c in minute degree, whilst the preceding price-swing is clearly a five wave expanding-impulse pattern. Traditional technical analysis this would describe as a double-top pattern, let’s see how this will unfold during the next several days!