Today I'm reaching into the technical "hat" of Elliott wave patterns and pulling out a random name to build a lesson around. Just so you know, there are a total of 13 patterns in Elliott wave analysis, all of which fall into two possible categories:
Motive (or impulse) waves: These are five-wave moves that travel in the same direction as the main trend, and so encounter little headwind during their developement. They are "clean, clear, crisp" and easy to identify.
Corrective waves: These three-wave moves go against the trend -- and so, unfold with a seeming struggle. They are generally choppy, complex, and harder to identify.
All right, here it goes. And, the chosen pattern is... a Double Zigzag. Well, if you're like me and mnemonic devices are your way of learning things, allow me to share this memory aid with you: Double Zigzag; "D" and "Z"; Dear Zeus; Zeus has a lightening bolt, which is exactly what a double zigzag looks like:
And now for a definition: A single zigzag is a simple three-wave -- i.e. corrective -- move labeled A-B-C, in which the top of wave B is noticeably lower than the start of wave A. When the end of a zigzag falls short of a normal target, often a socond zigzag will occur. In these cases, the zigzags are connected by a wave "X" -- producing a Double Zigzag.
That said, all the mnemonics and definitions in the world can't compete with seeing a double zigzag unfold in a real-world price chart of an actual commodity market. And, in the November 30 Daily Futures Junctures, that's exactly what you get. There, long-time editor and EWI's chief commodity analyst Jeffrey Kennedy presents the following close-up of a major market that shows a classic double zigzag underway since the start of 2009:
As you can see, prices are wrapping up the final leg of the zigzag sequence, prompting Jeffrey to make this noteworthy insight:
"The advance will take us into early next week. Thereafter, I expect a sizable [downward] correction to unfold."
And, with the help of two time-honored Fibonacci guidelines (seen at the bottom of the chart) Jeffrey is able to calculate this market's likely upside targets.