Hello there, this is tradingpedia.com and this video deals with flats with a weak b-wave, as a continuation to the previous one. We have described so far what are the conditions for a flat pattern – the b-wave to retrace more than 61.8% of wave a and, depending on its length, we have three categories of flats.
The first categories, drawn here, is called flats with a weak b-wave. It means that the b-wave retraces between 61.8% and 80% of wave a. As you can see the Fibonacci numbers are all over the place when it comes to the Elliott Waves Theory, and this is something to remember when it comes to your understanding of the theory.
If we have a bearish trend, and the market retraces with wave a, and then the b-wave retraces between 61.8% – 80%, then this category belongs to flats with a weak b-wave. In this category we have three possibilities, based on the c-wave’s length.
Flat With a b-failure
If the c-wave fully retraces the previous b-wave, or takes the highs in wave a, like this, this is called a flat with a b-failure. What does it mean? The inability of the b-wave to retrace more than 80% is the failure. Every time you will here the word failure when it comes to flats, it represents countertrend market strength. Therefore, if this is a flat with a b-failure and the market goes like this with the c-wave ending between 100%-138.2% of the previous b-wave, the pattern shows countertrend strength.
Another type of flat that it might form when the b-wave fails to retrace more than 80% of wave a is a very strong c-wave that exceeds 138.2%. This is called an elongated flat – the market elongates. During such a pattern you will see that usually it signals a contracting triangle.
Flat With a Double Failure
The last type of flat that belongs to this category is a flat with a double failure. One failure is when the b-wave fails to retrace more than 80% of wave a and another one is when the c-wave fails to fully retrace the b-wave.
In this case, two failure form and in this pattern, you will have the c-wave as the most time consuming. This is one of the most powerful patterns, because, as mentioned earlier, whenever you here the word failure, that shows countertrend strength. But in this case, there are two failures – the b-wave that fails to retrace more than 80% and the c-wave that fails to fully retrace the b-wave.
A flat with a double failure will usually have for the c-wave a terminal impulsive wave and not a classic one. In the case of a terminal impulsive wave, it is still labeled 1-2-3-4-5 but all the waves are corrective and not impulsive.
To sum up the types of the flat, based on the retracement of the b-wave, three types of flats exist. One is when the c-wave retraces between 100%-138.2%, another one is when the c-wave retraces more than 138.2% and often beyond 161.8% and when the c-wave fails to fully retrace the b-wave.
These are three types of flats, very common with the Elliott Waves Theory. Moving forward, we will discuss another category with other types of flats plus a running flat.
On this EURUSD chart, if this would be wave a, let’s assume that this would be the b-wave. If we use a Fibonacci retracement to find out the minimum retracement level for the b-wave, we see that it retraced between 80%-100%. It means that the market forms a flat with a weak b-wave. But if the c-wave that followed ended somewhere around here, it would be a flat with a double failure, showing countertrend strength. If it ended between 100%-138.2%, the market would have formed a flat with a b-failure, still showing countertrend strength.
Therefore, it is very important to know what kind of pattern the market forms, were does the flat fits in the overall picture and how to interpret it. Bye, bye.