ABC three-wave pattern of a secondary correction 

In my personal opinion, the Elliott Wave Theory is far too subjective to be applied to professional speculative activities. However, one of its tenets is highly useful for determining the tops and bottoms of secondary corrections in bull and bear markets. The Elliott Wave Theory posits that market price movements follow cyclical wave patterns, among which Elliott identified the ABC three-wave pattern as illustrated in Figure 7-15. 

Note: The ABC three-wave pattern of secondary corrections — the typical three-wave patterns for secondary corrections in bull markets (upper chart) and bear markets (lower chart). 

The art of speculation lies in buying and selling stocks, bonds, foreign exchange, commodities and other trading instruments in line with intermediate-term trends. The optimal long-term long positions are established near the bottom of an intermediate-term downtrend, which may mark either the end of a bear market or a turning point of a secondary correction in a bull market. Conversely, the optimal long-term short positions are established near the top of a bull market or the peak of an intermediate-term correction in a bear market. 

I will develop an ABC indicator in the future. It is rather difficult to define the preceding major uptrend, so we can use the 150-period or 100-period moving average to represent the long-term trend. We assume that a breakout above the key moving average signals the start of an uptrend, and then we can use the price waves oscillating around the 30-period moving average to characterize the ABC consolidation 

For the ABC correction, a breakout of the BC trend line can be considered as a signal later on.