Lesson 4 - Part A

Lesson 4 is split into 3 parts: A, B and C.

Part A: Extended Waves

Part B: Leading Diagonal Waves

Part C: Ending Diagonal Waves.

What is an Extended Wave?

An extended wave is a motive wave that is significantly longer and stronger than the other two motive waves in the sequence. It is typically the third wave, but it can also be the first or fifth wave.

Extended waves are caused by extreme investor sentiment and psychology. When investors are very bullish, they are likely to buy more and more of an asset, driving the price higher. This can lead to an extended wave in a bull market. Similarly, when investors are very bearish, they are likely to sell more and more of an asset, driving the price lower. This can lead to an extended wave in a bear market.

Here are some of the key characteristics of extended waves:

• They are longer in duration and have a greater price range than the other motive waves.
• They often have multiple subwaves that are also extended.
• They can be accompanied by high volume and strong price momentum.
• They often breakout from key technical levels.

Elliott wave analysts use extended waves to identify potential trading/investing opportunities and to project future price movements. For example, if the third wave of an impulse is extended, it suggests that the trend is likely to continue strongly.

TIP: The strongest volatility in the market occurs after important fundamental events. Usually important news we'll see strong spikes in the market and this is when you can expect to see extended waves.

Exetend Wave Rules:

- Rule # 1 - Wave 2 never falls below the starting point of Wave 1.

- Rule # 2 - Wave 3 is often the longest wave, but never the shortest of the waves 1-3, and 5. Wave 3 can be shorter than wave 1 or wave 5, but can't be shorter than both.

- Rule # 3 - Wave 4 can't enter wave 2 territory.