Basic 5-0 Requirements
Although the pattern incorporates 5 points within the structure (X, A, B, C, D), the starting
point of the structure (0) can be the beginning of any extended price move. However, the
initial point X must possess a specific alignment with respect to the A and B point. The X, A ,
B formation of the structure is usually some type of impulse move. The XA projection that
defines the B point can not exceed a 1.618. Any extension greater than a 1.618 will negate the
structure, as smaller impulse moves are preferred. Again, this is the failed wave 3 or wave 5 –
in Elliott Wave terms – that establishes the rest of the structure.
The BC leg is the longest price length of the structure and must be at least a 1.618 extension
of the AB length but it must not exceed 2.24. This tight range of 1.618-2.24 is a defining
element of the structure. If the 1.618 minimum limit is not reached, the structure is not a valid
5-0.
After the BC leg has reversed from that zone, the 50% retracement is measured from the B
point to the C point. In addition, the Reciprocal AB=CD is projected from the C point (an
equivalent length of the AB leg) to compliment the Potential Reversal Zone (PRZ). The
following illustrations and examples will clearly explain these concepts.
The 5-0 Pattern By Scott M. Carney
Copyright HarmonicTrader.com, L.L.C. 2005 All Rights Reserved!
Although the pattern incorporates 5 points within the structure (X, A, B, C, D), the starting
point of the structure (0) can be the beginning of any extended price move. However, the
initial point X must possess a specific alignment with respect to the A and B point. The X, A ,
B formation of the structure is usually some type of impulse move. The XA projection that
defines the B point can not exceed a 1.618. Any extension greater than a 1.618 will negate the
structure, as smaller impulse moves are preferred. Again, this is the failed wave 3 or wave 5 –
in Elliott Wave terms – that establishes the rest of the structure.
The BC leg is the longest price length of the structure and must be at least a 1.618 extension
of the AB length but it must not exceed 2.24. This tight range of 1.618-2.24 is a defining
element of the structure. If the 1.618 minimum limit is not reached, the structure is not a valid
5-0.
After the BC leg has reversed from that zone, the 50% retracement is measured from the B
point to the C point. In addition, the Reciprocal AB=CD is projected from the C point (an
equivalent length of the AB leg) to compliment the Potential Reversal Zone (PRZ). The
following illustrations and examples will clearly explain these concepts.
The 5-0 Pattern By Scott M. Carney
Copyright HarmonicTrader.com, L.L.C. 2005 All Rights Reserved!