Saturday, May 22, 2010

What form mega wave II will take ???

Since the lower trend line has been broken, the mega wave I that consists of 5 waves ((I),(II), (III), (IV) & (V)) has been completed as shown below. The next wave to be monitored is the mega wave II corrective waves.


Corrective wave is most unpredictable especially wave 2. Elliott, Frost and Prechter have classified 21 corrective patterns. The three most simple patterns are Zig-zag A-B-C, Flat A-B-C and Triangle A-B-C-D-E.

The first wave is wave A that can have either 3 sub-waves or 5 sub-waves. For this wave A, there are 3 possibilities as shown below.

CASE I : Wave A not yet complete. So far 5 sub-waves i, ii, iii, iv & v have been formed, it is possible that it can have a shallow rebound to form sub-wave vi follow by vii. It can continue further to form viii & ix and so on to form A. A dangerous and yet classical sign is a rebound to touch the lower resistance line before it continues with its down trend. sub-wave vii can be very dynamic and thus can be very damaging.


Case II
: Wave A Completed
. Under this scenario the rebound wave B will moved back to above the lower trend line to reach around the level of sub-wave iv, before moving down to form wave C to complete the mega wave II.


Case III : Waves A-B-C Completed.
The is the most bearish formation as it may develop into the double dips scenario especially when after it has formed 5 up-waves and it has stopped at somewhere near its previous high for a potential double tops formation as shown below.


The above charts are for my own consumption. My chart interpretation can be wrong as I am only a part-time chart technician.

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