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

WAVE 5

Wave 5 is the last impulse wave of the five-wave structure. At Wave 5, it is most common to find divergence between directional movement of price and the momentum oscillator. The target of Wave 5 is normally about 0.618 of the distance covered by Wave 1 and Wave 3, plotted from the low of Wave 4.

If Wave 5 extends, then the probable target is about 1.618 of the distance covered by Wave 1 and Wave 3. When Wave 5 does not extend, it could be retraced entirely by Wave A of the corrective A-B-C pattern.

A fifth wave’s failure means that Wave 5 fails to move above the end of Wave 3. A failure in Wave 5 could occur when Wave 3 is the extended wave. In such an instance, Wave 5 will relate to Wave 1 in price by 38.2 percent to 61.8 percent. Wave 5’s failure usually happens when it is the fifth wave of a larger impulse Wave 5 pattern. Wave 5 could also develop into a diagonal triangle. A diagonal pattern development at Wave 5 usually signals the termination of the trend. (See Figure 4.5.)

FIGURE 4.5 A fifth-wave failure, ending in a diagonal triangle pattern, signals the termination of the uptrend.