In addition to this live chart, I just finished a refined analysis on $DAX here:
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Second, since we are on the subject of wave count, there are certain rules that need to be established, in order to have the best outcome in your selection of Wolfe Waves patterns ("WW").
When presenting the possibility of a WW, what you are in fact dealing with is a similar triangular formation as Elliott Wave's Diagonal Triangle, and more specifically the Ending Diagonal ("ED").
Both are exactly the same, with a "Throw-Over" or "Throw-Under" which is WW's 5-prime position. The difference is that in Elliott Wave Principles ("EWP"), there is no awareness of the 1-4 Line projection.
Hence, when we talk about WW, we are effectively dealing with an ED but we are interested in the price action relative to the 1-4 Line.
So, very simple rule:
* * * MAKE SURE THAT EVERY POINT-1 OF A WOLFE WAVES PATTERN IS PRECEDED BY A WELL-DEFINED ZIG-ZAG * * *
Based on this rule, let's look at an example here:
GER30 - 60-Minute View: The Wolfe Waves Pattern Is Approached By A A-B-C Structured Zig-Zag:
Now, if we were to focus closer to the one that you drew, I could see a reasoning for a 5-wave impulse or a 3-wave correction, right?
First, let's consider the option that corresponds to your chart - I will post your chart first, and then mine, just to settle the agreement that both are pretty much identical:
Niko's Awesome Wave Count On Two Wolfe Waves:
GER30: Considering a Counter-Trending Zig-Zag Preceding A Wolfe Wave:
Now, take a moment and see whether you perceive a potential flaw here:
* * * TAKE TIME TO LOOK AT THE CHART * * *
Here is what I would see as problematic:
1 - The WW is effectively an Ending Diagonal. This means that it should be found at the END of an impulsive price action, and not at the beginning of one - Now, let's take a look at the chart again, and see where your is found. I think that this is a difficult question to answer, but then there is also one more clue:
What is the main trend? Answer is that the main trend is UP (Impulsive move or "IMP" is the force that propels the price action forward in greater distance over a shorter amount of time, as opposed to corrective move, which tends to consume time, as price consolidates and moves forward in lesser distance over a longer amount of time).
Now all this is arguable, but they would represent the reasoning behind choosing the larger pattern.
Truth is that it would be interesting to see whether the larger would fail in favor of the smaller, and if this occurred, then I would have to accept that not all has to make such sense in the market. However, holding on to simple directional rule is one way I would deal with this conundrum. So, simply saying:
The large WW represents a LARGE wave 4-to-5 of a bearish impulse, whereas the small WW has a starting wave-1 that runs in the direction of the IMP, when it should instead be at the end of a 1-2-3-4-5 move, as well as in the CORRECTIVE direction defined by that main trend.
I hope to be right on this, as I do not claim to know much about EWP. However, using EWP's rule, this is how I would rationalize my way through this conundrum.
@nikokoev - In this example, it is quite obvious that the IMPULSIVE direction is DOWN. Yet, the CORRECTIVE move that occurred in that chart moves into Point-1 territory. This is often associated with a more complex for a geometry, such as a FLAT formation.
As indicated before, FLATs are moving in a 5-3-5 wave fashion. So, expect that the segment highlighted by the PINK arrow would see a minimal decline of 38.2%, and as much as 1.272 (i.e.: lower than Point-3, possibly) if we were to deal with a FLAT.
Flats can start with a simple ZZ, or with a Leading Diagonal, which could be the case here (rarer geometric formation).