What Does Wolfe Wave Mean?
In technical analysis, it is a naturally occurring trading pattern present in all financial markets. The pattern
is composed of five waves showing supply and demand and a fight towards an equilibrium price.
These patterns can develop over short- and long-term time frames such as minutes or weeks and are
used to predict where a price is heading and when it will get there.
If identified correctly, Wolfe waves can be used to accurately predict the scope (equilibrium price) of the underlying security. To identify Wolfe waves, they must have the following characteristics:
Waves 3-4 must stay within the channel created by 1-2
Wave 1-2 equals waves 3-4 (shows symmetry)
Wave 4 is within the channel created by waves 1-2
There is regular time between all waves
Wave 5 exceeds trendline created by waves 1 and 3 and is the entry point
The estimated target price is a price along the trendline created by waves 1 and 4 (point 6).
Please note that point 5 shown on the diagram above is a move slightly above or below the channel created by waves 1-2 & 3-4. This move is usually a false breakout or breakdown of the original channel and is the best place to enter a stock long or short. The false action at point 5 occurs most of the time in the pattern but isn’t absolutely necessary. Point 6 is the target level from point 5 and is the most profitable part of the Wolfwave channel pattern. The target price (Point 6) is found by connecting points 1 and 4.
I JUST CAME ACROSS FEW SUCH PATTERNS ,ONLY FUTURE WILL DECIDE WORTH. JUST LEARNING.
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