🌟 Capital Market Chronicles – Episode 262: TECHNICAL ANALYSIS – ELLIOTT WAVE THEORY (Part II)
“Five steps forward, three steps back — just like life.” 😅📊
👉 5 waves in the direction of the main trend
👉 3 waves against it
This pattern reflects how optimism builds, peaks, and eventually cools off. Markets surge on belief, pause on doubt, and correct when reality taps investors on the shoulder.
🔹 Impulse Waves (1–5): The Trend Builders
Impulse waves move with the primary trend. This is where excitement grows and headlines are born.
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Wave 1: Early optimism
The move begins quietly. Only a few brave (or lucky) traders step in. Most people are still suspicious. -
Wave 2: Doubt creeps in
Prices pull back. The common reaction: “See? I knew it was a false move.” Weak hands exit. -
Wave 3: Confidence explodes 💥
This is the strongest, longest, and most energetic wave. Fundamentals look great, news turns positive, and participation broadens. This is where trends feel real. -
Wave 4: Profit booking
A pause, not panic. Early entrants take money off the table while the trend catches its breath. -
Wave 5: The final surge
Latecomers rush in emotionally. Valuations stretch, optimism peaks, and risk is often highest — even though prices look irresistible.
📌 Rule of thumb:
If Wave 3 feels obvious on social media, TV debates, and WhatsApp forwards — congratulations… you spotted it late 😄
🔹 Corrective Waves (A–B–C): The Reality Check
After euphoria comes sobriety.
Corrections move against the main trend and exist to reset expectations.
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Wave A: “Just a small correction”
Denial is strong. Most believe the trend will resume immediately. -
Wave B: The false hope bounce
Prices recover partially, convincing many that the worst is over. -
Wave C: The real damage
Fear sets in. Capitulation happens. Acceptance finally arrives.
Corrections are uncomfortable, but they are essential. They cleanse excess optimism and prepare the ground for the next meaningful move — think of them as market yoga 🧘♂️ (painful, but healthy).
📌 Understanding these waves helps traders:
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Avoid buying near emotional peaks
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Stay prepared for corrections instead of panicking during them
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Recognise whether the market is driven by confidence… or emotion
📖 Next up:
Wave degrees — and why Elliott Waves appear everywhere, from 5-minute charts to 5-year charts 📈🔍
⚠️ Disclaimer: This Blog is for general guidance only and does not replace personalised financial advice.
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