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Applying the Elliott Wave theory by Clarence J. Liataud The validity of the Elliott Wave theory can be proven by p applying its wave sequence to any long-range commodity or stock chart. The reason most analysts have trouble applying this theory while prices are unfolding is the difficulty in determining the shape and size of a current correction. However, if you keep in mind that after the first and third wave (whatever their size) there will be a correction, and only a correction, you will know what price action to expect. The various shapes of corrections are below. To apply the Elliott Wave theory to a given commodity, show how the price movement of that commodity has progressed and conformed to the wave sequence of the theory. This will enable you to locate in which wave prices are currently trading the overall pattern, thereby permitting you to estimate the size and direction of the next known wave. Five small waves make one larger wave. For example, five minor waves make one intermediate wave, five intermediate waves make one major wave, and so on.

by Technical Analysis, Inc.