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Written and copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved.
This page describes the truncation pattern of the Elliott wave principle, how price moves not in a straight line but in
a series of rises and retracements.
The figure to the right shows what a truncation wave looks like in a bull market. Truncation occurs when wave five fails to move beyond
the end of wave three. For this reason, truncation is sometimes called a truncated fifth (or even a 2B).
The red line illustrates how wave five fails to meet or exceed the end of wave three.
The figure to the right show the subwave configuration of an ideal truncation in a bull market. Waves one, three, and five, are composed of five sub waves.
Waves two and four have three subwaves each. Thus the configuration of the subwaves is 5-3-5-3-5.
This chart is the same as the prior one but the wave occurs in a bear market. Wave five fails to reach the end of wave three as
the red line shows.
According to Frost and Prechter, you will see a truncated fifth often after an unusually strong wave 3 thrust.
Rules
The truncation has rules that govern its shape. They are listed here.
- The truncation is a motive wave that fails to complete the trend.
- Subwave five falls to move beyond the end of wave three.
- The pattern has a 5-3-5-3-5 subwave structure.
-- Thomas Bulkowski
Copyright © 2008-2010 by Thomas N. Bulkowski. All rights reserved. Bumper sticker: Watch out for the idiot behind me.
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