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The figure to the right shows what a wave three (third wave) extension looks like in a bull market. An extension is an unusually long impulse wave with
exaggerated subwaves, according to Frost and Prechter. Many impulses contain only one extension in their actionary subwaves. That is,
only one of the waves one, three, or five, will be extended. When an extension occurs, it will likely occur during wave three.
The subwaves within an extension have nearly the same duration and amplitude as the ones in the rest of the wave. That means if wave three is extended,
then the subwaves in wave three will resemble the subwaves in waves one and five.
Four subwaves join wave three to total five subwaves and complete the extension. I show wave three of higher degree as a red line and subwaves
in black. Knowing that wave three extends suggests waves one and five will be normal length.
This chart is the same as the prior one, but the wave occurs in a bear market. The extended wave three appears in red
(shown this way to highlight the wave length), but it really is composed of the black subwaves.
An extension can occur within an extension. For example, if wave three is extended, then subwave three within wave three can be extended.
Thus, wave three will have nine subwaves instead of five.
Rules
The wave three extension has rules that govern its shape. They are listed here.
- The wave three extension is a motive wave composed of nine sub waves, each appearing similar in shape and duration.
- If an extension occurs on wave three, then waves one and five will be normal waves, not extensions.
- Most impulse waves contain extensions (either wave one, three, or five will be extended).
- An extension can, itself, be extended (an extension within an extension).
- Wave three is the most commonly extended wave.
- Wave four cannot overlap wave one.
- Wave three is never the shortest wave.
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