Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology

DIAGONAL PATTERNS

In her book, Street Smarts, Linda Raschke writes, “All you need is one pattern to make a living!” She then introduces a pattern called Three Little Indians, developed by her good friend, Bill Wolfe. Others call the pattern Wolfe waves, three drives, three tops, and so forth. There are certain applicable ratios among the five waves in the diagonal, but for all practicable purposes, it has been found that the pattern is reliable most of the time without measuring or counting such ratios. (See Figure 3.13.) It does not matter by what name it is called. As long as the pattern gives a good reading, it will be worthwhile to pay close attention to it when it appears.

FIGURE 3.13 Bearish and bullish diagonal patterns.

The setup of the waves in the pattern is symmetrical, and wave 5 sometimes makes a false breakout move outside the protracted line of waves 1 to 3. In other respects, the pattern is similar to diagonal triangles, though perfect Wolfe waves are rarely found in charts of all time frames and if there is one, it would take an inordinate amount of time to find it unless the trader is prepared to buy a special pattern-recognition program to trace it. See Figures 3.14 to 3.17. The pattern consists of five waves, labeled 1 to 5, and can occur at the end of any movement that has five waves, usually in wave C or in a fifth wave of an Elliott wave pattern structure. ...