Elliott Wave Theory

Theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves.

Investopedia Says:
Based on rhythms found in nature, the theory suggests that the market moves up in a series of five waves and down in a series of three waves.

The key difference between the Elliott Wave Principle and other cyclical theories is that this theory suggests no absolute time requirements for a cycle to complete.

Related Links:
Acquaint yourself with the principle built on the discovery that stock markets did not behave in a chaotic manner. Elliott Wave Theory
Discover new developments that help you apply this difficult theory to trading and how computer power can help reduce the guess-work. Elliott Wave In The 21st Century
Uncover the history and logic behind this popular trading tool. Taking The Magic Out Of Fibonacci Numbers

Technical Analysis concept first put forth by Ralph Nelson Elliott in 1939, then discussed in a 1978 book by Robert Prechter and A. J. Frost, The Elliott Wave Principle. Mr. Prechter also has a newsletter, "The Elliott Wave Theorist." The theory holds that all human activities, including stock market movements, can be predicted by identifying a repetitive pattern of building up and tearing down, represented graphically as eight waves, five in the direction of the main trend, followed by three corrective waves. A 5-3 move completes a cycle, although cycles and the underlying waves vary in duration. Some practititioners believe the most recent "supercycle" began in 1932 and ended with Black Monday in 1987, but there is not unanimous agreement and the predictive value of the theory has been in question since then. The skyscraper indicator, which correlates the construction of the world's tallest buildings with stock market tops, was popularized by "The Elliott Wave Theorist."