Chapter 20
Two Legs
The market regularly tries to do something twice, and this is why all moves tend to subdivide into two smaller moves. This is true of both with-trend and countertrend moves. If it fails in its two attempts, it will usually try to do the opposite. If it succeeds, it will often then extend the trend.
Everyone is familiar with an ABC pullback in a trend that unfolds in three steps. There is a countertrend move, a small with-trend move that usually does not go beyond the trend's extreme, and then a second countertrend move that usually extends deeper than the first. Trends themselves also tend to subdivide into two smaller legs as well. Elliott Wave followers look at a trend move and see three with-trend waves. However, it is better to look at the first strong with-trend leg as the start of the momentum (the Elliott Wave 3), even if there was a prior with-trend move or wave (Elliott Wave 1). That strong with-trend move often subdivides into two smaller with-trend moves, and, after a pullback, the trend will often make two more pushes to test the extreme of the trend (these two pushes create Elliott Wave 5). This two-legged view of markets makes more sense to a trader since it offers sound logic and abundant trading opportunities, unlike Elliott Wave Theory, which is essentially useless to the vast majority of traders who are trying to make money.
A break of a trend line is the start of a new leg in the opposite direction. Any time there is a new trend or any capitulation ...
