Fasten your wrist watches : CMP 2560Impulse and Corrective Structure
On the ETHOS weekly chart, the price action aligns closely with classic Elliott Wave theory. A complete 5-wave impulse pattern (labelled 1-2-3-4-5 in green) can be observed progressing within a rising parallel channel. Each impulse sequence is followed by a 3-wave corrective phase (labelled A-B-C in blue), after which a new cycle initiates.
Impulse Waves (1-2-3-4-5):** These waves move in the direction of the primary trend. Waves 1, 3, and 5 represent strong advances, while waves 2 and 4 are smaller pullbacks or consolidations.
Corrective Waves (A-B-C):** Corrections are typically countertrend moves that restore balance before the next motive cycle resumes. The corrective sequence here perfectly resets the price for the next bullish advance.
Channeling Technique
Drawing parallel channels around waves 1 and 3, and extending them through wave 2 or 4, offers structural clarity and potential target zones for subsequent waves—especially for the powerful wave 5.
Momentum and Divergence
The Relative Strength Index (RSI) at the bottom provides crucial support to this wave count. Notably, multiple Bearish Divergence signals (marked as "Bear" in red) preceded key market tops, aligning with wave 3 and wave 5 peaks. The RSI's cyclical response adds confidence to the completion of impulse or corrective phases and helps anticipate market reversals.
Projection and Trading Strategy
Based on the current wave structure:
- ETHOS has potentially completed a full corrective A-B-C phase.
- The initiation of a new impulse cycle is underway, with projected sub-waves (1-2-3-4-5) mapped along the upper channel.
- Conservative traders can look for confirmation with a breakout above the corrective channel or a bullish RSI signal.
- Aggressive entries may be considered near wave (2) lows with stop-losses below prior corrective supports.
As always, proper risk management and confirmation from supporting indicators are essential for successful implementation.
Traders are encouraged to validate their wave counts with price action and momentum tools.
