hard · Elliott Wave Theory Rule of Alternation & Channeling Guidelines
An analyst draws a base channel by connecting the ends of Wave 1 and Wave 3, then drawing a parallel line through the end of Wave 2. As Wave 5 develops, price closes well above the upper parallel of this base channel on strong volume, then reverses sharply.
What does this behavior most likely indicate under Elliott Wave channeling technique?
- A throw-over, signaling that Wave 5 has reached its orthodox extreme and the impulse is complete.
- A channel breakout confirming Wave 5 will extend well beyond the base channel for an indefinite distance.
- A failed fifth wave, since Wave 5 could not stay contained within the original base channel.
- Evidence the base channel was mis-drawn and must be redrawn using Wave 2 and Wave 4 instead.
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