Wednesday, February 9, 2011

The Golden Section Revisited

Remember this technique? Not sure one has followed through yet since I have posted on these but this one seems pretty interesting.

Here's a quick refresher on the this technique where wave 5's length is sometimes related by the Fibonacci ratio to the length of waves 1 through 3.

Per EWP, Page 137, it is written, "Unless wave 1 is extended, wave 4 often divides the price
range of an impulse wave into the Golden Section. In such cases, the latter portion is
.382 of the total distance when wave 5 is not extended, as shown in figure 4-6, and
.618 when it is."

Above, we have a fifth wave extension and within that extension just a normal fifth. Using what we know about the Golden Section and ratio, I have divided the larger 5th wave into the Golden section where the later part is .618 of the total length.

Should the wave form take on the proportions based on the terminus of wave 4 blue, wave 5 would be expected to complete near 1326.

Today, we may have seen the completion of wave 4 red of wave 5 blue. Again, using the terminus of 4, assuming the fifth wave of the fifth does not extend, the later portion is .382 the total length of the structure. Isn't it interesting that it lines up almost completely with 1326? Fibonacci may be telling us 2 things.

1. Maybe wave 4 red is complete
2. Maybe wave 5 blue does terminate at 1326

However, what if there is a fifth wave extension of a fifth wave extension? Look at the target for 5 below.

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