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Chapter 4 — Origins and Applications of the Fibonacci Sequence
In Figure 30, a 1.618 multiple of wave
1 identifies 643 as an ideal objective for
wave 3 up from the August low. The
wave 3 high came in at 635, moderately
below our objective. Sometimes prices
will fall short of an objective, while exceeding
it at other times. Fibonacci projections
and retracements identify highly
probable areas or regions of termination,
not absolute objectives. Figure 31 illustrates
a third wave rally that attained a
2.618 multiple of wave 1.
There is little difference between calculating
fifth waves and third waves,
except that with fifth waves we have
more “history,” namely in waves one and
three. Within a five-wave move, wave
three will typically be the “extended”
wave, while waves one and five will tend
toward equality (see Figure 32). So our
first Fibonacci ratio is equality (1.000)
between waves one and five. When wave
five is the extended wave (as is often the
case in commodities), wave five will
equal a Fibonacci multiple of waves one
through three.
Figure 30
Figure 31
The Ultimate Technical Analysis Handbook — © 2009 Elliott Wave International
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