Corrective Waves.

These are the waves that, by definition, go against the trend. They connect the impulse waves. Unfortunately, there are four different types of corrective wave. Corrective waves are labeled with letters.

A-B-C Corrective Waves
Wave A: Correction To Rally – Initially Wave A may appear to be a correction to the normal rally. However, if it breaks down into five
subwaves, it indicates that a new market trend may have developed.
Wave B: Bear Market Correction – Wave B tends to give bears an opportunity to sell as others take profit on their short trades or exit
their long positions.
Wave C: Confirms End Of Rally – Wave C is the last wave of the cycle. At this point, Wave 3 typically breaks key support zones and
most technical studies confirm that the rally has ended.

The most simple or straightforward corrective pattern is the zig-zag. The pattern is a simple A-B-C pattern and tends to do more damage to the preceding trend than other corrective waves. Read the rest of this entry »

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