An often forgotten rule on an Impulse is
"Wave 2 of an Impulse is never a Triangle"
I am pained to see so many of the Elliott Wave Analysts in India and around the world not understand this concept and persistently label Wave 2 of the Impulse as a Triangle, throwing all their projections awry.
Let me illustrate how, I used this in 2005 to forecast a top of 14000 (this was posted after almost 30 months) and how the same was used to forecast a low of 6200 (reached after another 14 months)
See the attached Daily Chart 1 of Dow Jones Industrial Average.
You can see clearly that there is a clear Triangle that took about 20 months to unfold. The pattern is clearly impulse, and wave 2 is a Triangle. So its imperative that the pattern is not an Impulse and will show no wave 4 and wave 5. So it will remain a 5-3-5 pattern and even before the last 5 has unfolded we can assume that this will unfold as a Zig Zag.
Now lets take this analysis further - If this rally on the DJIA is not an Impulse and will be Zig Zag, then the Zig Zag being a corrective pattern is doomed to total retracement and thus pointing to a target below 7500.
So I made this (at that time outrageous) forecast, DJIA will go on to hit 14000 levels and then collapse to sub 7000 levels. This came true about 4 years after the forecast.
Now Fast forward to 2011.... look at a 60 min chart of DJIA (Attached here)
. Now see the Contracting Triangle also highlighted with the trend lines.
Do you see any similarity? Does the Triangle tell you whats about to unfold on the DJIA?
I will continue counting this chart as it begins to unfold........
At the moment its fairly easy to say DJIA should test 11400 first, before it can even think about going up any further (Now that is another method and rule that I will talk about later)