2 Early Channel Techniques | 21st September, 2017

Channels drawn using Elliott’s techniques, outlined here, cannot be drawn until a reasonable amount of a wave has completed. There are two techniques to draw a channel about a new movement earlier.

1. BASE CHANNELS

Gold 2017
Click chart to enlarge.

This is the earliest channel that can be drawn about a new movement. This channel was drawn at the end of minor wave 2.

Base channels have two main purposes:

1. As the wave progresses the edge which is opposite to the main direction of movement should provide support or resistance. Here, the wave is down and the upper edge should provide resistance to bounces along the way down. It is the opposite for a bull wave; the lower edge should provide support for pullbacks along the way up.

A sloping trend line offering support or resistance can be used to place trailing stops.

2. A third wave may be identified or confirmed if it has the power to break through the base channel in the direction of the trend. A third wave should have the power to break above resistance at the upper edge of a base channel for a bull wave. Here, minor wave 3 should have the power to break below support at the lower edge of the base channel.

2. ACCELERATION CHANNELS

Gold 2017
Click chart to enlarge.

Later on in the development of a wave the base channel may be redrawn as an acceleration channel. This may be done after a third wave shows enough power to break out of the base channel in the direction of the trend, or it may be done earlier.

Acceleration channels are redrawn each time price makes a new extreme in the direction of the trend.

When a third wave is complete, then this channel is an Elliott channel (drawn using the first technique).

Acceleration channels have one main purpose:

1. To show where corrections within the trend find support or resistance, on the side opposite to the trend.

The side opposite to the trend may be used to place a trailing stop when trading the trend.

Published @ 06:22 a.m. EST.

6 thoughts on “2 Early Channel Techniques | 21st September, 2017

  1. Hi Lara,
    I am a brand new member and am very happy I found this site. Thank you.

    I have a copy of Jeffrey Kennedy’s “The ultimate Technical Analysis Handbook” , one of the resources recommended by you. On page 40 , Kennedy says “My theory is simple: Five waves break down into three channels, and three waves need only one. The price movement in and out of these channels confirms each Elliott wave.”

    I see that you are able to fit 5 waves in one channel and I do not understand. I would appreciate your help with this, please.

    Thank you kindly,
    David

    1. Elliott wave is fractal. Within an impulse each of waves one, three and five, are themselves five wave structures. They will each fit into their own smaller channels.

      Each time a channel is broken in the direction opposite to the trend it confirms an end to that wave and the next wave beginning.

      I could draw more channels about each of the smaller waves on the hourly chart. For example, the first hourly chart
      could have a smaller channel drawn about minuette (i) (green). Then another about minuette (ii). And so on.

      But at this time frame it’s more appropriate and useful for trading to draw the larger channel.

      As each subwave unfolds I do often draw a smaller channel about it and use that to tell when it is over.

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