Consolidating, triangular or “trading range” patterns are also important to consider; they are very difficult to trade. For this reason, they are identified with the expert by coloring the bars differently. We will see switches from ascending to descending patterns in the middle of a pattern, called wave failure. To anticipate these patterns in order to trade is a very difficult task since when we see the signs, the pattern is almost complete.
The wolf wave pattern is among these difficult patterns but yields itself better to the trade. Because this trade pattern can be detected fairly rapidly, we have indicators in the Expert Advisor™ and The Explorer™ to help you spot it. Here is an illustration of the pattern:
Wolf Wave is a sequence of two failed waves forming a triangle with base BD and AC as the apex more or less. Once the price moves from point D, it must touch or penetrate line AC and then bounce towards extended line AD. The price projection is located on that line right above the crossing of extended lines AC and BD. This pattern is rare and unreliable so be sure to place appropriate stops.
The time projection is usually not as accurate as the price projection. It is nevertheless a way to trade a triangular pattern although the risk is in my opinion greater because these patterns often fail to develop fully.
Many Elliott Waves software analyse and show irregular ABC patterns. This is an area where many Elliott chartists will disagree on the wave count; many times, the pattern has to complete before the correct nomenclature can be applied. Nevertheless we have in the set two indicators that will detect converging triangles, whether ascending or descending and the Expert can also flag them.
One indicator works from the latest data available and will only show the latest formation (cannot back test); the other will display the triangle from the date you select, the date being the latest peak or trough of the triangle formation you want to display for back testing. This pair of indicators approach has been used with price and time projections as well so you track or test depending on the mode you are in.
Note: Remember that the ABC pattern follows the 12345 pattern and that one of theses patterns will nest in an impulse, while the next one will nest in the corrective wave. In other words, a cycle overlaps two patterns and once the 5 wave pattern is completed, the wave counter for all sub-waves is reset to 1 and the next sub-wave will be either a 1 or an A. When the main trend changes, all the waves are reset to 1or A.
Next: Filtering Waves