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We have found that predetermined price
objectives are useful in that if a reversal occurs at that
level and the wave count is acceptable, a doubly significant point has
been reached. When the market ignores such a level or gaps through it,
you are put on alert to expect the next calculated level to be
achieved. As the next level is often a good distance away, this can be
extremely valuable information. Moreover, targets are based upon the
most satisfying wave count. Thus, if they are not met or are exceeded
by a significant margin, in many instances you will be forced in a
timely manner to reconsider your preferred count and investigate what
is then rapidly becoming a more attractive interpretation. This
approach helps keep you one step ahead of nasty surprises. It is a
good idea to keep all reasonable wave interpretations in mind so you
can use ratio analysis to obtain additional clues as to which one is
operative.
Keep in mind that all degrees of
trend are always operating on the market at the same time.
Therefore, at any given moment the market will be full of Fibonacci
ratio relationships, all occurring with respect to the various wave
degrees unfolding. It follows that future levels that create several
Fibonacci relationships have a greater likelihood of marking a turn
than a level that creates only one.
For instance, if a .618 retracement of
a Primary wave [1] by a Primary wave [2] gives a particular target,
and within it, a 1.618 multiple of Intermediate wave (a) in an
irregular correction gives the same target for Intermediate
wave (c), and within that, a 1.00 multiple of Minor wave 1 gives the same
target yet again for Minor wave 5, then you have a powerful
argument for expecting a turn at that calculated price level. Figure
4-15 illustrates this example.
Figure 4-15
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