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like the motive. The third Elliott wave extensions

are more frequent than the fifth wave extensions.

The first wave rarely extends therefore it is not

a common topic among the Elliott wave traders.

Today, I want to take another look at the first

wave extensions and more importantly reveal their

five minor waves.  The first wave that is extended is prolonged

in length, height and on the time scale.  

Moreover, the first, third and fifth minor waves of the first wave can also be extended.  Note that the first Elliott wave does not regularly extend

wave can cause the first wave extensions after the breakouts and

pullbacks to retest those key levels.

A financial instrument that is in a really bullish sector is more likely

to extend during the first wave due to a high demand.

A consistent fight between bullish and bearish market players

at the start of a trend can generate a very gorgeous first wave

extension.  

Typically during an extended bullish first wave, 

the bears believe that no one should be buying the asset, so they are 

selling after every rally.  On the hand, bullish fundamental investors

are loading the stock because they know better that the fundamentals

are improving rapidly.  

That is the case when one group is completely 

wrong without knowing it, and the other is spot on.  

In the end, there is an extended first wave that aligns with the market 

sentiment of those who got it right.

It is paramount that Elliott wave traders get into the habit of finding out 

what has truly caused the first wave extensions.  That will help one to 

understand who are those that creating the new trend.

Most first wave extensions form what I label the irregular first wave. That irregular first wave is usually formed few months later after the Initial Public Offering (IPO).  It is a phenomenon that long term investor must take advantage of.  

Another cause of the first wave extensions is an extended corrective phase.

So, previously there was a healthy trend that was corrected by a lengthy 

correction (may be at least nine years correction).  In that instance, if

the company reinvents, restructures and strengthens itself throughout that lengthy correction, one should not be surprised to see a very beautiful tall and extended first Elliott wave. 

Warning

Please do not assume that the first wave will definitely extend because one of those factors is in place.  It is possible but not guaranteed that it will extend.  That is all.

An Elliott wave rule states that if the fourth Elliott wave is prolonged

(extended on the time scale) or lengthy then the fifth wave is more likely to extend.  Right?

What I want you to do is to rationally change that rule a bit. Take it as it is stating that:

"after a lengthy corrective wave, the subsequent impulse wave is likely to extend".  

Does it make sense to you?  Or does it make you smash your expensive computer out of anger?

Alright, even if you disagree, please hold your thoughts and come back another day to scrutinise what I have just said.  

Those who agree will quickly accept that it makes sense (rationally) to expect an extended first wave after a lengthy corrective phase.  One example of a lengthy correction is WXY pattern or complex corrective waves that have taken a long time to be formed.

On the monthly chart, that could be nine or more years.  On the hourly chart, that may be few days and so on.  You got it now.

Without the improving fundamentals and market sentiment, the first wave extensions will fizzle out like a storm in a tea cup.

The company must pass the Google finance acid test. It must have a brighter future in a sector that is not yet overbought but still bullish.  To understand everything about my favourite first Elliott wave extensions, please read my article about the irregular first Elliott wave.

The irregular first waves are my favourite first wave extensions.

In the near future, I will be compiling a list of first wave extensions charts that will illustrate everything that I have explained so far.  Please stay tuned.

I wish you the very best.

Happy Trading To All

This article is written by 

George Beaulieu

founder of https://www.24Elliottwaves.com