Applied Elliott Wave

Home Study Program

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FLATS
a c
b 5
2 3
1 4
4
1
3 2
a 5
FLAT IN RISING MARKETS
c FLAT IN DECLINING MARKETS b

N ext to the Zig Zags, Flats are the most common patterns in the markets. Flats retrace

much less of the earlier wave than the Zig Zags. The entire pattern appears to move sideways
covering the same price territory thrice in the three waves.

Unlike the Zig Zag that has an internal structure of 5-3-5, Flats sport a 3-3-5 internal structure.
Careful observation of the flat pattern shows that wave 'a' of the Flat itself is a sharp corrective
pattern. This wave does not possess the momentum to take the price deeper, and thus the next
wave 'b' unfolding pulls back prices to almost the beginning of wave 'a'. Both waves 'a' and 'b' are
three wave corrective structures and the next wave 'c' is a motive wave taking prices back to
the end of wave 'a'.

The complete movement of the Flat is exactly what it says.... FLAT. Flats normally are seen
when the preceding trend is very strong. A shallow flat portends a strong trend and vice versa.
 DOUBLE THREE

J ust as the Zig Zag transforms or morphs into a Double Zig Zag, The Flat pattern transforms

into a Double Three. While the Double Zig Zag achieves a deeper retracement, the Double three
brings about a sideways movement in a longer period of time. Double Three appears especially
when markets are in a waiting mode and biding time for news, announcement, or results etc.

w c
y
b a c a

b 2
2 1
1
4
Y
3 4 b
a 5 a b
c 3c x
DOUBLE THREE IN DECLINING MARKETS
DOUBLE THREE IN RISING MARKETS

The Flat while adding one more flat to itself once again needs a intervening three wave
pattern. Thus the pattern is

Flat – intervening Three – Flat.

This is labelled W – X – Y. The internal structure of the Double three is 3-3-3. The intervening
three wave is normally likely to be a Zig Zag pattern.

Double threes are commonly seen in very short time frames, intraday charts, where markets
appear to be in a sideways mode for a long time and then suddenly spurt up or slide down on
news. They are also seen very commonly in Commodity and Forex Charts.
 TRIANGLES

T riangles are the only corrective waves that sport five waves and they are labelled as a-b-

c-d-e. However unlike the motive waves that move prices from one level to another, Triangles
do not show such large movement and the five waves of the triangle move sideways.

Each of the five waves of the Triangle are corrective b

in nature and thus the internal structure of a triangle d
is 3-3-3-3-3. The five corrective waves that form the
triangle overlap over one another and the same price
level is covered by market movement again and again
as long as the triangle lasts.

The trend lines of a Triangle are drawn by joining the

end points of wave 'a' with wave 'c' and wave 'b' with
c e
wave 'd'. Sometimes wave 'e' can shoot beyond the a
trend line a-c. This happens more often than not.

The major rule to be remembered about the triangle is 'A Triangle is the penultimate wave of
any pattern in which it occurs'.

Having seen and understood all the different wave formations, we are in a better position to
understand the finer aspects and rules of each of the patterns. A knowledge of all the patterns
will help us study these patterns in more detail, and help us apply all the rules to the patterns.

This understanding of the patterns will greatly aid basic forecasting of the market. When you
are able to say what pattern is unfolding, you only need to decide where the market is likely to
be when the pattern ends and you have a very basic forecast for the markets.