WHAT HAS BEEN LEARNED ABOUT THE PHI-ELLIPSE SINCE THE LAST BOOK CAME OUT SEVEN YEARS AGO?
The most important finding concerning the PHI-ellipse is that as a trading tool one cannot work with the basic structure of a 3-wave pattern as basically assumed in all of the previous books.
Original Structure: Three Peaks/Valleys Form a PHI-Ellipse
The past definition was as follows: PHI-ellipses are interesting graphical trading tools because their structure is founded on a 3-wave pattern, as shown in Figure 5.6.
FIGURE 5.6 PHI-Ellipse Circumventing a 3-Wave Pattern
Source: Robert Fischer and Jens Fischer, The New Fibonacci Trader, John Wiley & Sons (2001), p. 142.
Once the three relevant points A, B, and C are identified on a chart in an idealized 3-wave price movement, the PHI-ellipse can be positioned around these three points.
Wave 1 from A to B is an impulse wave. Wave 2 is the corrective wave to the impulse wave. Wave 3 is expected to produce a second impulse wave in the direction of the first impulse wave.
This idealized wave structure based on the Elliott wave principles is correct but cannot be generalized for every market situation and is not good enough for a trading tool.
A More Stable Position: Four Peaks/Valleys Form a PHI-Ellipse
In the search for PHI-ellipses that are stable and consist of wave structures available in every market situation, PHI-ellipses with four peaks ...
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