Replies to post #137993 on Simple's Green Room

[pennies2007]

No, the Wave 3 are the large candles that occur before the ledge consolidation occurs, Qui. The consolidation that we call the ledge is just what happens initially after the large candles. They occur while the market is dealing with what just happened. Most likely, ledges are formed during some profit taking. Then, the next move sets up.

I actually just posted an ACAD 4 hour chart for Jav. The big red candles during the drop would be considered the spike. The sideways channel that has happened since then would be the ledge.

Here's the hourly chart again with the detailed wave count on ACAD. Notice where those big, high volume downside candles popped up...during Wave 3, which is normal in a TDI count. The entire downward movement is considered a single spike. It's only when the ledge pops up (consolidation) that we can say that particular spike is finished.

Now, it's going sideways during a Wave 4 movement. This is one Wave 4 movement that may not make it back up to the 71.6 fib. It may consolidate right in here and start falling again. Once it breaks the ledge to the downside, the drop should continue.

There's another name for this type of setup. It's called the drop-base-drop configuration. It's where the market experiences a sharp drop but shows very little bounce afterwards. Those patterns normally occur in 3's before any type of meaningful rally can take place.

And here's another interesting note...not only is this ledge important now, it will also be important in the future when price eventually moves back up to revist this area. Price action tends to stall on retests of these key ledge areas. And, if the retest happens during a Wave 4 completion move on the TDI, the chances of a big downside drop are really good.