ABC Correction Waves – Elliott Wave theory

Following with the Elliott Wave theory that we have seen in the previous article, in this article we will see how the 5 impulse waves (in favor of the trend) proposed by Elliot are corrected and reversed by 3 waves against the trend called ABC Correction Waves.

Observe the following image:

ABC Correction Waves
ABC Correction Wave in a bull trend

The price swings marked by colored lines and the letters a, b, c form a corrective movement of the bullish wave formed by swings 1, 2, 3, 4 and 5.

Because we have used a bull market in the previous example does not mean that this theory does not apply to bear markets. The same pattern 5-3 may appear like this:

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Elliot Waves Theory – Description and Features

Elliot Waves Theory – Offering Great Predictions!

The Elliott Wave theory developed by Ralph Nelson Elliott (1871-1948), is based on the principle that price movements of financial markets can be described through the waves that form it and the study of the graphic formation of these waves. It is based on Dow theory and is a significant advance on this. In other words, it analyzes the different movements or «waves» in any period of time, both the bullish and the bearish waves.
After the death of Elliott, this theory was almost forgotten and years later was AJ Frost and Robert Prechter who with his book Principles of Elliott Waves (1978) made ​​it popular.