I continue covering progress labels.

Rules, proportions, position

indicators, and progress labels in corrective patterns.

Dear friends!

In the previous articles, I covered progress labels in the impulse patterns. Today, I
will explain the application of the progress labels to corrective patterns.

If you are not familiar with the NeoWave theory, I recommend you to read all the
articles, starting from the first one, in the NeoWave series based on Glenn Neely’s
book Mastering Elliott Waves.

Neo Wave theory. Part 1. Rules for creating charts.

Neo Wave theory. Part 2. Basic information on Polywaves and Structure Labels.  

NeoWave. Part 3. Retracement Rule 1.

NeoWave theory. Part 4. Retracement Rule 2.

NeoWave theory. Part 5. Retracement Rule 3.

NeoWave. Part 6. Retracement rule 4. Conditions “a” and “b”.

NeoWave. Part 7. Retracement rule 4. Conditions “c”, “d” and “e”.

NeoWave. Part 8. Retracement rule 5. Conditions “a” and “b”.

NeoWave. Part 9. Retracement rule 5. Retracement rule 6, condition “a”.

NeoWave. Part 10. Retracement Rule 6. Conditions “b”, “c”, and “d”.

NeoWave. Part 11. Retracement rule 7.

NeoWave. Part 12. Impulsions and the rules to analyze impulse wave patterns.  

NeoWave. Part 13. Corrections. Rules to identify a correction.

NeoWave. Part 14. Triangles. Rules to identify triangles.

NeoWave. Part 15. Basic and advanced rules of logic to analyze triangles.

NeoWave. Part 16. Extended rules of logic for Flats and Zigzags.

NeoWave. Part 17. Extended rules of logic for complex corrective patterns.  

NeoWave. Part 18. Rules of complexity and balance. Compaction procedures.

Power ratings.

NeoWave. Part 19. Progress labels applied in trending impulses.

NeoWave. Part 20. Application of progress labels to terminal impulses.

NeoWave. Part 21. Channeling in impulses and Fibonacci relationships.

Progress labels and their positions in corrective patterns

Remember, progress labels in corrective patterns are A-C letters that mark waves
within a correction. I will cover the specific features of flat corrections depending on
the wave properties. I will also define the post-effects of different progress labels.

Progress labels for a B-Failure

Remember, a B-wave is a failure, when the (B) wave retraces 61.8%–81% of the (A)
wave. If so, there are the following post-effects:

1. A B-failure almost always takes place when the (A) wave is a double zigzag or
double combination (completing with a triangle).

2. The (C) wave should retrace at least 61.8% of the wave (B). Ideally, wave (C)
should retrace wave (B) by 100%, otherwise, the pattern falls into the double
failure category.

3. Waves (A) and (C) may relate 61.8%.

This pattern can occur as:

 Waves 2, 4, (A), (B) of any pattern;
 Waves (C), (D), (E) of a horizontal triangle;

 Part of a rare running double flat.

There is an example above. The chart displays a B-failure pattern. It is clear that
wave (B) retraces 61.8% of wave (A). Wave (C) is 100% of wave (B) and, accordingly,
wave (C) is 61.8% of wave (A). So, the progress labels for a B-failure are met.

Progress labels for a C-failure

A C-failure occurs whenever wave (C) fails to retrace all of wave (B). There are the
following characteristics:

1. Wave (B) usually retraces all, or almost all, of wave (A).

2. Wave (С) should definitely not be the shortest segment in the correction and
very frequently it will consume the longest period of time of the three
corrective segments. Additionally, it can be equal to wave (A) or wave (B).

3. A complex C-failure is often a terminal impulse.

4. C-wave failures which are less than 61.8% of wave (В) should be considered
extremelyrare. When it does happen, the (В) wave should take the most time,
with wave (A) and (С) equal in time.

5. In a complex C-failure pattern, the (B) wave should subdivide more

completely than wave (А). Usually, it will be a double zigzag. The (С) wave
should be either 61.8% of wave (А) or complete in a zone 61.8% of wave (А)
taken from the beginning of wave (А). If the (С) wave exceeds 61.8% of wave
(A), the pattern refers to irregular failures.
This pattern can occur as:
 Wave: Any 2, 4, a, b.
 Wave: 5 of a terminal Impulse.

As an example, let us study a C-wave failure and analyze its progress labels. It is
clear from the above chart that the (B) wave retraces a little more than 100% of
wave (A), which corresponds to the first rule.
It is clear from the above chart that the wave (С) takes more time than wave (B).

This chart displays the relation between wave (С) and wave (A). Wave (С) is equal to
wave (A). so the second rule for the progress labels of the C-wave failure.
It is clear from the chart that wave (С) is a little more than 61.8% of wave (B), which
is quite a common case, according to the fourth rule of a C-failure.

The fifth rule can not be applied to our example, as it is relevant only for a complex
pattern. In this example, a C-failure flat is simple. Remember, a complex pattern is
one, whose at least one wave is composed of three monowaves or more or
includes another pattern. To study the complexity rule in detail, read this article.

Progress labels for a Common Flat

In a Common pattern, all of the waves will be approximately equal in price. This
pattern must meet the following requirements:

1. Wave (B) should be between 81% and 100% of wave (A).

2. Wave (B) will, the majority of the time, be the most time-consuming of the
three segments and will be more complex than wave (A).

3. Wave (С) should be at least 100% of wave (B).

4. Wave (С) should move slightly beyond the end of wave-a, but not by more
than 10 or 20%.

5. Wave (С) should have an impulse structure.

A common flat pattern can occur in the following places:

  Waves, 2, 4, a, b of any pattern;
 Waves c,d,e of a horizontal triangle;

 A part of a rare running double flat.

As an example, let us look at a common flat pattern that is a (B) wave in a larger
pattern. It is clear from the above chart that wave (B) of the flat is between 81% and
100% of wave (A), so the first rule of progress labels is met.
The time periods of wave (A) are marked with the dark green areas in the chart. As
you see wave (С) is close wave (A) in terms of time, the (B) wave is the most time-
consuming of the three segments, which corresponds to the second rule.

It is clear from the above chart that wave C, according to the third rule, is not less
than 100% of wave (B). Besides, it is beyond the (B) wave by about 20% (the blue
horizontal area), which corresponds to the fourth rule.

Like in the previous example this flat is not a complex one, and so, the fifth rule
doesn’t apply to it. All the rules for progress labels of a common flat have been met.

Progress labels for a Double Failure flat

Remember, the typical features of this rare pattern are that the (B) wave shouldn’t
retrace more than 81% of the (A) wave, and wave (С) should be less than 100% of
wave (B). There are the following characteristics of a double failure flat:

1. Wave (A) in a double failure is likely to be a double combination, followed by

a strong zigzag for wave (B). In a rare instance, wave (A) would be a triple
combination, the (B) wave will a double zigzag or a combination.

2. A double failure flat can look like a horizontal triangle. In a double failure, the
(C) wave is an impulse pattern(a five). In a horizontal triangle, the C wave is a
corrective pattern (a three).
 3. In some cases, the (A) wave of a double failure also looks like a double
failure. It usually occurs when it is a double combination that ends with a
horizontal triangle.

4. Wave (С) wave will generally be 61.8% of wave (А).

A double failure can occur as:

 Wave 2, 4 of any pattern;
 Wave (A) in an irregular or triangle pattern;

 Wave (B) of a zigzag, common or elongated pattern;

 The first corrective phase of a rare running double flat.

Unfortunately, a double failure is an extremely rare pattern, so I haven’t found a

real example. However, I am sure you will find real examples of such a pattern on
the price chart of Bitcoin or any other trading instrument. I will be glad if you share
your discoveries in the comments.

As an example, I present a schematically outlined double-failure. Wave (A) is a

double combination composed of a zigzag and a horizontal triangle, whose borders
are marked with yellow lines. The double combination is followed by a strong zigzag
for wave (B). Besides, wave (B) is less than 81% of wave (A).
The double failure resembles a developing horizontal triangle, as it is contracting
(pink trend lines, 0-B and A-C). We see that this is a true double failure as its wave
(С) is a five-wave pattern.

Wave (С) in the double failure retraces less than 61.8% of wave (A).

Progress labels for an Elongated Flat

An elongated flat has the following characteristics:

1. Wave (С) mustbe more than 138.2% of wave (B) (preferably, more than
161.8%).

2. Wave (A) and wave (B) should be similar in price and/or time. It is also
accepted when wave (B) is at least 61.8% of wave (А). Waves (A) and (B) can
also relate by 61.8% in time.

3. Elongated flats almost always appear in triangles as segments or even whole

legs. Therefore, an elongated flat is an early signal of a triangle forming.

4. Very often in an elongated flat, the (С) wave will consume the same amount
of time as waves (A) and (B) combined.

An elongated flat occurs as follows:

 Wave 1,3 or 5 of a Terminal Impulse
  Wave (A), (B), (C), (D) of a Horizontal Triangle

 Wave: (E) of an Expanding Horizontal Triangle;

 It could be the first corrective phase of a double flat which will probably be
the entire leg of a horizontal triangle orterminal impulse.

Let us analyze progress labels for an elongated flat on a real example.

The chart displays an elongated flat, whose waves (A) and (B) are similar in price but
different in time.
It is clear from the above chart that wave (С) is 161.8% of wave (В), which
corresponds to the first rule for the progress labels for an elongated flat.

In this pattern, the (С) wave takes the same amount of time as waves (A) and (B)
combined, which corresponds to the fourth rule.

Progress labels for an Irregular Pattern

Progress labels of an irregular pattern must meet the following requirements:

1. Wave (B) must be between 101% and 138.2% of wave (A).

2. Wave (C) must be at least 101% of wave (B)

3. The (B) wave will almost always be a zigzag, while wave a will usually be some
type of flat. The (C) wave must be impulsive. If wave (C) is corrective, this may
be an expanding triangle or a contracting triangle with a large (C) wave.

An irregular pattern may be found as:

 Wave 2, 4, (A), (B) of any pattern;
 Wave (C), (D), (E) in a horizontal triangle.

Now, let see how to analyze progress labels in an irregular pattern on the example
of the BTCUSD chart.

The two-hour chart displays such a correction. The (B) wave is a little less than
138.2% of wave (A), which corresponds to the first rule for progress labels of an
irregular pattern.

According to the second rule for progress labels in an irregular pattern, wave (C)
should be more than 101% of wave (B). As you see from the above chart, this rule is
also met in our example.

The third rule applies only to complex patterns. As the irregular pattern is simple in
our example, we do not check for this rule. However, I suggest you try to do it
yourself. Try to find an irregular pattern on the chart of your favorite trading
instrument. Share your results in the comments. I will be glad to appreciate your
success and answer your questions.

Progress labels in an Irregular Failure pattern

This pattern should meet the following requirements:

1. Wave (B) must be larger in price than wave (A) (preferably, it should be
132.8% of wave (A)).

2. Wave (C) must not retrace all of wave (B)

3. Wave (C) will generally relate to the a-wave (price and time) by equality orthe
Fibonacci ratio

This pattern should occur as one of the Progress Labels below:

 Wave 2,4 before an extended wave;
  Wave (В) (before an elongated wave of a flat;

 Wave (В) of a zigzag in which wave (С) is at least161.8% of wave (А).

Now, let us analyze progress labels in an irregular failure pattern on the

real Bitcoin price chart.

The above chart displays an irregular failure pattern. It is clear that the (B) wave is
greater than wave (A) in price and is about 132.8% of the (A) wave, which
corresponds to the first rule. Besides, wave (C) doesn’t retrace 100% of wave (B), so,
the second rule is met.
It is also clear that the () wave is roughly equal to wave (A) in time. So, the third rule
for the progress labels in the irregular failure flat is also observed.

Progress labels in a Running Correction

The running correction is the most powerful standard correction, so it imposes very
specific requirements on post-market action:

1. The price movement after the running correction rises or falls quicker than
the pattern immediately before the running correction of the same degree.

2. Wave (B) should be much greater than waves (A) and (C).

3. The (B) wave does not always relate to wave (A) but, if it does it will probably
be 261.8% of wave (A).

4. Wave (A) and wave (C) will tend toward equality in price and time.

Places where Running Corrections canoccur:

 Wave 2 before an Extended 3rd wave;
 Wave 4 before an extended 5th wave (rare cases)

 Wave (B) right before an elongated C-wave, andin which the whole A-B-C is
probably the entireleg of a triangle  or one of the completed phases of a
complex correction which is the entire leg of a Triangle.
  Wave (B) in a zigzag that is part of a triangle (of one or two degrees higher).

 Wave (Х) that could occur right before the longest corrective group of a
complex corrective series (it is very rare).

Let us study a real example of a running correction using the BTCUSD chart.

The schematically outlined chart above shows that waves (A) and (C) tend toward
equality in price and time. Besides, wave (B) is about 261.8% of wave (A), which
corresponds to the above rules 2,3, and 4. Besides, immediately after the running
correction, the price quickly goes up, which corresponds to rule 1.

It is clear from this example that such a correction can be mistakenly interpreted as
the beginning of a new impulse pattern. To avoid mistakes, you should know the
construction rules and the corresponding progress labels. I cover progress labels
for impulsive patterns in  Part 19 and Part 20. In the following articles, I will
continue covering progress labels applied to triangles and zigzags.

The knowledge of progress labels is very important, as it helps not to only identify
the patterns but also to make up an accurate forecast. You should also consolidate
the learning through practical application. Apply these techniques in practice and
test everything in trading. The LiteForex functions are more than enough for this. If
you haven’t yet chosen your broker, it’s high time you started trading with
LiteForex. Besides, there is a wonderful opportunity to win a dream house, a brand
new car, and cool Apple gadgets in the dream draw with the total prize fund of 350
000 USD.
I wish you good luck and good profits!

P.S. Did you like my article? Share it in social networks: it will be the best “thank
you" :)

Ask me questions and comment below. I’ll be glad to answer your questions and
give necessary explanations.

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Price chart of BTCUSD in real time mode

Periods
 M1
 M5

 M15

 M30

 H1

 H4

 D1

 W1
Zoom1D1W1M3M6M1YALL30. Nov14. Dec28. Dec11. Jan25. JanDec '20Jan '21F…
15k20k25k30k35k40k45k

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reflect the official position of LiteForex. The material published on this page is
provided for informational purposes only and should not be considered as the
provision of investment advice for the purposes of Directive 2004/39/EC.
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WRITTEN BY
Mikhail Hypov
Investment analyst and independent trader

What should I read next?

25 May. 2020 17:12
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