Education

# 5 STEPS TO CHANNEL THE TARGET WAVE 5 USING ELLIOTT WAVES

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STEP 1 - Once the 1 wave is completed use Fib Retracement to find out the possible wave 2 level. Usually wave 2 is 0.5 - 0.8 of wave 1. In a uptrend Fib level is close to 0.8 but its the opposite on downtrend

STEP 2- Once the wave 2 is completed use Fib Extension to find out the possible wave 3 level. Usually wave 3 is 1.618 of wave 1 or 2.618 of wave 2.

STEP 3 - Once the wave 3 is completed then you can draw a line to join 1 and 3 and then draw a parallel line on wave 2 to project the wave 4. Usually wave 4 is 0.5 - 0.618 of wave 3

STEP 4 - Once wave 4 is completed then you can draw a line to join wave 2 and 4 and then remove the previously drawn line joining wave 1 and 3

STEP 5 - Then draw a parallel lines from wave 1 and 3 and the 50% trend line of the above parallel lines to project wave 5. Usually wave 5 is 1 or 0.618 of wave 1

Hi surangadesilva, can you clarify something for me please- I am stuck on Step 3, the projection of Wave 4.
I drew a line, A, from 1-3 and placed a parallel line on 2. How do you use that line?
I tried a few different ways and found that a line exactly the same length as the line from 1-2, and parallel to it, lands within the 0.5 - 0.618 zone for 4. But I am not 100% sure this was the intention of the step?
iguana10
@iguana10, When you draw a parallel line on wave 2 that provides the initial wave 4 boundary and you need to wait until wave 4 completes to join wave 2 and 4 to redraw the parallel lines on wave a and 3 and the middle line to project wave 5. So doing this will help to find when the wave 4 retrace back but you can use the fibo 0.5 - 0.618 to find the zone of wave 4.

And more info here: http://countingpips.com/2016/09/how-to-draw-trend-lines-with-elliott-wave/ (note that their wave 5 channeling method doesn't include a middle line of wave 1 & 3)

Hope this helps
@surangadesilva, Thanks, everything you say and any references you provide will most definitely help. I appreciate your time. This is my very first serious step in my EW education and I know I have a long walk ahead.

I can't see yet what boundary this line is providing. After applying the fibo limits (and obviously the zone can't be any further 'West'- don't know the correct terminology yet- of the candle at Wave 3 end), there is only one boundary left to close of the rectangle where Wave 4 will end- the 'Eastern' most one.

Thanks again and I will more than likely be requesting to pick your brains many more times!
iguana10
@iguana10, Its simple...

1) Use the channel tool
2) Use the 2 points to connect the end of wave 2 with the end of wave 4
3) use the 3rd point to the end of wave 1 so you search for wave 5 end

Usually the over-throw of the channel happens on wave 3 unless the structure meets some guideline that suggests the over throw will happen on the 5th wave ( for example underthrow of the second wave or sideways action of wave 4 of a lower degree near the top channel resistance)

Examples: