The extension in the motive waves

Examples

The chart below represents an impulse with a huge extension in wave ((3)), which subdivides into five waves, which are quite the same as waves ((1)), ((2)) and ((5)). As you can see, after wave ((4)) we had a tiny price movement in the fifth wave. In most cases, it’s likely that if you have wave three more than 1.618 multiple of wave one, there’s a green light for a relatively small wave five.

extension in the third wave bullish trend

Sometimes, the fifth wave of an impulse forms an extension, which occurs during massive rallies on the markets. As you can see from the next chart, wave (1) could be wave ((5)) itself, so only a three-wave decline and the subsequent pullback pointed out that the extension started. Moreover, a triangle in the wave (4) confirmed that there’s a developing impulse from the ending of the wave ((4)). Thus, we should be extremely careful with an extension in the fifth wave in the real-time wave counting.

An extension in the first wave doesn’t form often. The next example shows a five-wave advance with the longest wave ((1)). Keep in mind, if the wave one is extending, wave three usually is smaller than wave one. In this case, in the absolute majority of cases, an impulse with extended wave one usually has the shortest wave five. The third wave can’t be the shortest, by the way.

extension in the firth wave bullish trend

It also possible to have an extension on both waves one and three of an impulse, we can see this situation on the following chart. Waves ((1)) and ((3)) are much bigger than wave ((5)). Also, waves ((1)) and ((3)) have a very detailed structure, but wave ((5)) doesn’t.

Another option is an extension in both waves three and five. It usually happens during a strong and long trend. As shown on the next chart, wave ((1)) is small while waves ((3)) and ((5)) are huge and we can see all subdivisions of these impulses.

The trickiest type of an extension is a multi-extension. It usually forms on the stock market. During a multi-extension, we face with a lot of similar waves, so sometimes it’s pretty hard to do a wave count. The key to recognizing a multi-extension is a series of corrections, which form smaller and smaller one after another. If this happens, we could predict a multi-extension, but at the same time, we also should try to find alternate wave counts with fewer expectations. By doing this, we also could find the critical levels, which supposed to be red lines for a wave count with a multi-extension.

The Bottom Line

Extensions are an essential part of impulse waves. They happen all the time on all the markets. Moreover, in terms of trading, extensions bring the most interesting opportunities, but we also should always remember to keep risks at a reasonable level.

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