Zigzags (5-3-5)
Zigzags and their complex combinations are the only corrective patterns which can temporarily “resemble” Impulsive patterns. To avoid misinterpretation, very specific limits must be placed on zigzag behavior. Below are the minimum requirements which allow a pattern to be categorized as a zigzag:
The A-wave should not retrace more than 61.8% of the previous impulse wave of one larger degree (if present).
The B-wave should retrace at least 1% of wave A.
Wave-C should move, even if only slightly, beyond the end of wave A.
If the wave group has followed these three minimum parameters, it is time to check to adherence to the maximum limits imposed on the B-wave of a zigzag:
No part of wave B should retrace more than 61.8% of wave A.
If a part of wave B retraces more than 61.8% of wave A, that part will not be the end of wave B. It is likely to be the first segment of a more complex correction for wave B. The end of wave B will complete at 61.8% of wave A or less.
The deciding factor for categorizing a zigzag formation is the length of the C-wave:
If the C-wave is less than 61.8% of wave A, this is a truncated zigzag.
If the C-wave is between 61.8% and 161.8% of wave A (inclusive), this is a normal zigzag.
If the C-wave is more than 161.8% of wave A this an elongated zigzag (be careful with this pattern, it could be part of an impulse wave).
Truncated zigzag
This is quite a rare zigzag variation. To be justified, this formation must meet the following criteria:
Wave C cannot be shorter than 38.2% of wave A but should be less than 61.8% of wave A.
After completion of the zigzag, the market must retrace at least 81% of the entire zigzag, and preferably, it should retrace 100% or more. This will confirm the counter-trend strength indicated by the extremely short C- wave.
A truncated zigzag will most likely be found as one of the five sub-waves of a Triangle, oras a segment of one of the sub-waves of a Triangle
Normal zigzag
In a normal zigzag, the C-wave can be from 61.8% to 161.8% of wave A. To identify this pattern, it should satisfy the below conditions:
Wave B must not retrace more than 61.8% of wave A.
Wave C should be at least 61.8% but less than 161.8% of wave A.
Elongated zigzag
An elongated zigzag is characterized by an oversized C-wave, that is why it temporarily resemble impulsive activity. An elongated zigzag is the best imitator of impulsive behavior. This makes them very difficult to recognize while they are unfolding. Usually, they can be only confirmed after they have completed.
When the third wave in a sequence is more than 161.8% of the first wave, the pattern is likely to be the first three waves in a five-wave impulse, rather than an elongated zigzag. The retracement following the third wave helps to decide between the two different patterns. After an elongated zigzag, the price should reverse and retrace more than 61.8% of the C-wave before the end of the C-wave is exceeded. If these conditions are met, the pattern is likely to be an elongated zigzag, if the conditions are not met, there is likely to be forming an impulse pattern.
Zigzags and their complex combinations are the only corrective patterns which can temporarily “resemble” Impulsive patterns. To avoid misinterpretation, very specific limits must be placed on zigzag behavior. Below are the minimum requirements which allow a pattern to be categorized as a zigzag:
The A-wave should not retrace more than 61.8% of the previous impulse wave of one larger degree (if present).
The B-wave should retrace at least 1% of wave A.
Wave-C should move, even if only slightly, beyond the end of wave A.
If the wave group has followed these three minimum parameters, it is time to check to adherence to the maximum limits imposed on the B-wave of a zigzag:
No part of wave B should retrace more than 61.8% of wave A.
If a part of wave B retraces more than 61.8% of wave A, that part will not be the end of wave B. It is likely to be the first segment of a more complex correction for wave B. The end of wave B will complete at 61.8% of wave A or less.
The deciding factor for categorizing a zigzag formation is the length of the C-wave:
If the C-wave is less than 61.8% of wave A, this is a truncated zigzag.
If the C-wave is between 61.8% and 161.8% of wave A (inclusive), this is a normal zigzag.
If the C-wave is more than 161.8% of wave A this an elongated zigzag (be careful with this pattern, it could be part of an impulse wave).
Truncated zigzag
This is quite a rare zigzag variation. To be justified, this formation must meet the following criteria:
Wave C cannot be shorter than 38.2% of wave A but should be less than 61.8% of wave A.
After completion of the zigzag, the market must retrace at least 81% of the entire zigzag, and preferably, it should retrace 100% or more. This will confirm the counter-trend strength indicated by the extremely short C- wave.
A truncated zigzag will most likely be found as one of the five sub-waves of a Triangle, oras a segment of one of the sub-waves of a Triangle
Normal zigzag
In a normal zigzag, the C-wave can be from 61.8% to 161.8% of wave A. To identify this pattern, it should satisfy the below conditions:
Wave B must not retrace more than 61.8% of wave A.
Wave C should be at least 61.8% but less than 161.8% of wave A.
Elongated zigzag
An elongated zigzag is characterized by an oversized C-wave, that is why it temporarily resemble impulsive activity. An elongated zigzag is the best imitator of impulsive behavior. This makes them very difficult to recognize while they are unfolding. Usually, they can be only confirmed after they have completed.
When the third wave in a sequence is more than 161.8% of the first wave, the pattern is likely to be the first three waves in a five-wave impulse, rather than an elongated zigzag. The retracement following the third wave helps to decide between the two different patterns. After an elongated zigzag, the price should reverse and retrace more than 61.8% of the C-wave before the end of the C-wave is exceeded. If these conditions are met, the pattern is likely to be an elongated zigzag, if the conditions are not met, there is likely to be forming an impulse pattern.