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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Wave Three Extension

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Busted
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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 11/20/2017
23,430 72.09 0.3%
9,522 38.86 0.4%
756 -2.12 -0.3%
6,791 7.92 0.1%
2,582 3.29 0.1%
YTD
18.6%
5.3%
14.6%
26.1%
15.3%
Tom's Targets    Overview: 11/14/2017
23,700 or 22,800 by 12/01/2017
9,300 or 9,800 by 12/01/2017
800 or 750 by 12/01/2017
7,000 or 6,500 by 12/01/2017
2,625 or 2,540 by 12/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

This page describes the wave three extension pattern of the Elliott wave principle, how price moves not in a straight line but in a series of rises and retracements.

 

The wave three extension in a bull market. 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.

 

 

The wave three extension in a bear market. The chart on the right 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.

 

Wave Three Extension 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.

-- Thomas Bulkowski

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Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. EARTH FIRST! We'll strip-mine the other planets later.