hard · Elliott Wave Theory
In a textbook impulse, wave 1 runs from 100 to 130 and wave 2 retraces to 109. Wave 3 tops at 175, and wave 4 declines to 131. A purist insists this entire structure is invalid.
Which rule, if any, is actually broken, given the standard non-overlap rule?
- No rule is broken: wave 4's low of 131 stays above wave 1's high of 130, wave 2 holds above the wave-1 origin, and wave 3 is not the shortest, so the impulse is fully valid
- The non-overlap rule is broken because wave 4's territory at 131 enters the price range traversed by wave 1, which spanned 100 to 130, voiding the impulse
- Wave 2 is invalid because it retraced more than the 61.8% Fibonacci limit permitted for second waves, which caps the count before wave 3 even begins
- Wave 4 is invalid because, as the corrective wave alternating with wave 2, it was required to retrace deeper than wave 2 did in percentage terms
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