# NeoWave Wave Theory by Glenn Neely. Description of the fourth rule of correlation of wavelengths and conditions for its implementation

14 min readIt is time to consider the most difficult, the fourth, rollback rule. It has not only the usual conditions for us, but also subcategories of conditions.

## Rule 4

This rule indicates, that the wave m2 moves in the opposite direction with respect to m1 and reaches from 61,8% up to 100% (not including) its length. The amplitude of m3 is from 100% up to 261,8% wavelength m2. When measuring the ratios m0 to m1, we select one of the following conditions and assign the structure symbols corresponding to the selected condition to the waves. Then it is necessary to calculate the ratio of m3 to m2 and determine to which category the market situation under study belongs.

### Condition (a). m0 less than 38,2% m1.

When the condition is met (a) in the vicinity of the wave m1, select the appropriate category and add one or more notation «:F3/:c3/:s5/[:sL3]».

### Category i. m3 from 100% (inclusive) up to 161,8% (not including) m2.

1. If the level of the starting point is m3 (plus one unit of time) achieved during the period, superior to its formation time, then m1 may be the initial correction wave, following the x-wave. Respectively, the x-wave in this case is m0. Also, m1 may be the final segment of the correction phase, which is part of a larger standard or custom configuration. At the endpoint m1, the notation «:F3/:s5». In case of «:F3» m1 will be an a-wave of flat correction, and in the case of «:s5» – zigzag end segment. Remind you, what are standard shapes (configuration) we examined in the second training article, non-standard in detail we will consider in the following.

but, if the amplitude m1 is less than 61,8% length m(-1), the designation must be removed from the structure list «:s5». It should also be crossed out, if the wavelength m0 is less than the wavelengths m(-1) and m1.

2. If subsequent waves reach the initial level m3 in a time equal to or inferior to the period of formation of this wave, then the probability, that m1 completes any price pattern Elliott tends to zero. In this case, it is worth adding notation to the structure list «:F3/:c3».

Wherein:

- If the price projections m0 and m2 do not overlap even partially, cross out from the structure list «:c3».
- If the amplitude of m2 is not more than 70% wavelength m1, and the amplitude is m3 – almost 161,8% length m1, the price projections of the waves m0 and m2 do not overlap and the duration of the formation of m0 exceeds the duration of m(-1) either m1, then the notation should be added to the structure list «:s5».
- If the designation contains the designation «:F3», then m1 can act as an a-wave correction of a larger and more complex configuration, and m0, respectively, x-wave.
- If it is not deleted from the list «:c3», then m1 can be a segment of a terminal impulse or an expanding triangle.
- If there is a designation in the list «:s5», then m1, probably, is the third wave of momentum stretched fifth.

3. If the length m4 is inferior to the price extent of the wave m3, then at the endpoint m1 should put «:F3/:s5».

Wherein:

- If m2 is a composite wave, which includes more than three monowaves, entry level m2 (plus one unit of time) achieved over time, shorter period of its formation, duration m2 exceeds duration m1, and m2 crosses the trend line, passing through the endpoints m(-2) and m0 for a smaller period of time, than development time m1, then m1, apparently, completes the zigzag, which is part of a moving or incorrect correction. In this case, you must add «:L5». The zigzag will also indicate the designation «:s5».
- If the temporal extent m0 is inferior to the length of waves m(-1) and m1, then you need to delete from the structural list «:s5».
- If, according to the results of the analysis, the designation remains in the structure list «:F3», then m1, probably, is the first wave of a triangle or flat.

### Category ii. m3 from 161,8% up to 261,8% (inclusive) m2.

1. If the length m(-1) is over 261,8% amplitudes m1 or m4 are longer in length, than m3, the probability of completion by wave m1 of any configuration is minimal. Therefore, at the endpoint m1 we place only one notation «:F3».

2. If m4 is shorter than m3, then the notation should be added to the structure list «:s5», then determine the type of emerging Elliott price pattern, depending on the fulfillment of the conditions below:

a. If the amplitude m2 is less than or equal to 70% length m1, and the length m1 is in the range of 101–161,8% length m(-1), price projections m0 and m2 do not overlap and m(-2) surpasses in price amplitude m(-1), then m1, most likely, ends the third wave of the price pattern of the trend impulse with a stretched fifth.

Wherein, if the price extent m1 is within 161,8–261,8% length m(-1), the probability of the completion of the zigzag wave m1 as part of a complex correction is growing, and m2 is an x-wave.

b. If the amplitude m2 is less than or equal to 70% length m1, and length m1 is from 100% (inclusive) up to 161,8% (not including) amplitudes m(-1), the price projections of the waves m0 and m2 overlap at least partially, and m(-2) exceeds in length m(-1), then m1 can complete the third wave of the price pattern of the terminal impulse by the stretched fifth.

c. If the amplitude m1 is in the range of 161,8% up to 261,8% (inclusive) length m(-1), probability of, that m1 completes the zigzag, part of a complex correction, is rising. m2, respectively, completes the x-wave.

In all cases (a, b and c) the third wave option may still be the case, when is it possible to identify it as part of a price pulse pattern with two stretched, whose fifth wave exceeds all other waves in length. I’ll cover this in more detail in one of the following lessons.

but, if m1 is more than 261,8% length m(-1), then the only option is to include m1 in the complex correction.

d. If the amplitude m2 is less than or equal to 70% length m1, and m1, in turn, less than m(-1), then m1 can only be part of the zigzag price pattern.

e. If the amplitude of m2 exceeds 70% length m1, then m1, probably, is the last zigzag segment.

but, if the price projections of the waves m0 and m2 overlap each other, and the level of the starting point m3 is reached during a period of time shorter than the duration of the formation of m3, then m1 may well represent the third wave of the terminal pulse of the stretched fifth.

### Category iii. m3 over 261,8% m2.

1. If the length m(-1) exceeds 261.8% longer m1 or m4 longer, than m3, there is no probability that a wave m1 will complete any configuration. Therefore, at the endpoint m1 we place only one notation «:F3».

2. If m4 is shorter than m3, then the probability, that m1 is the initial segment of any price figure tends to zero. Therefore, you should add only one notation «:s5».

Consider the condition (a) rule 4 by example.

First, check, is rule 4 fulfilled. Wave m2 moves in the opposite direction with respect to m1 and is about 78,6% its length, that meets the criteria of the fourth rule.

Price m0 is less than 38,2% m1, which means the criteria of the condition (a) rules 4 also apply.

Now you need to define a category. Amplitude m3 is in the range from 161,8% up to 261,8% wavelength m2, which means it is category ii conditions (a) rules 4.

Now find out which of the items in category ii corresponds to our market situation. Since m4 is shorter than m3, then in our case the second point is relevant. So add to the structure list «:s5», then determine the type of emerging Elliott price pattern.

Amplitude m2 less than 70% length m1, which means we will consider items a through d.

Length m1 is within 161,8–261,8% length m(-1), price projections m0 and m2 do not overlap (approximately coincide except that the start and end points of these waves) and even visually visible, what m(-2) significantly exceeds in amplitude m(-1). Hence, takes place subparagraph c. The probability of the completion of the zigzag wave m1 as part of a complex correction increases, and m2 is an x-wave (add to its notation list «x:c3»).

### Condition (b). m0 from 38,2% up to 100% (not including) m1.

If condition a is satisfied in the vicinity of the wave m1, we choose the appropriate category and add one or more notation «:F3/:c3/:s5/(:sL3)/(x:c3)/[:L5]».

### Category i. m3 from 100% up to 161,8% (not including) m2.

1. If the level of the starting point is m3 (plus one unit of time) achieved during the period, inferior or equal to the time of its formation, then the probability, that m1 is the final segment of any Elliott price pattern is close to zero. At the endpoint m1 we put the notation «:F3/:c3».

Wherein:

- If according to the results of the study it turns out, what is the most likely option «:c3», then m1 may be part of the price pattern of the terminal impulse.
- If the level of the endpoint m3 is intersected by subsequent waves until the intersection of the level of the endpoint m0, m1, in turn, exceeds wavelength m(-1) and m(-3), and m2 crosses the trend line, passing through the minimum points m(-2) and m0 for a period of time, less than or equal to the development period m1, then m1 may well be wave 5 of the price figure of the stretched fifth. So, the designation should be added to the structure list «[:L5]».

2. If the level of the starting point m3 is reached during the period, superior to its formation time, then at the endpoint m1 it is necessary to put the notation «:F3/:c3/:s5».

Wherein:

- If during development wave m2 crosses the level of endpoint m1, then before the designation «:c3» should put «x».
- If the endpoint level m3 intersects before the intersection of the endpoint level m0, m1 is longer than m(-1) and m(-3), and m2 crosses the trend line, connecting the minima m(-2) and m0 for a period of time, less than or equal to the formation period m1, then m1 may be the fifth wave of the price pattern, the stretched fifth. So, the designation should be added to the structure list «[:L5]».
- If the amplitude m1 is less than 61,8% length m(-1) the designation must be removed from the structure list «:s5». It should also be crossed out, if the temporary wavelength m0 is less than the wavelengths m(-1) and m1.
- If the amplitude is m(-1) is 161,8% and more than length m1, and the price span m4 is less than 61,8% length m3, then it’s worth removing from the structural list «:F3».

3. If m4 is shorter than m3, then wave m1, hardly starts any price pattern, which means that at the endpoint m1 should be set «:c3/:s5».

Wherein:

- If during development wave m2 crosses the level of endpoint m1, then before the designation «:c3» should put «x».
- If m2 is a composite wave, which includes more than three monowaves, entry level m2 (plus one unit of time) achieved over time, shorter than the period of its formation and this period of time exceeds the duration m1, length m(-1) is at least 161,8% amplitudes m0, and m2 crosses the trend line, connecting the minima m(-2) and m0 for a period of time, shorter m1 formation period, then m1, apparently, completes the zigzag, which is part of a moving or incorrect correction. In this case, you must add «:L5».
- If the temporal extent m0 is inferior to the length of waves m(-1) and m1, then you need to delete from the structural list «:s5».
- If m(-2) exceeds in length m(-1), and designation «:c3» not preceded «x», hence the notation «:c3» should be removed from the structure list. «:c3» also worth striking out in case, when the level of the starting point m5 is reached in a period of time, equal to the formation time of this wave.
- If «:c3» still present in the structure list, m1, then this wave can be an x-wave of complex correction. That means you should add to the list of possible notation «x:c3?».

4. If m4 is less than 61,8% wave amplitudes m3, then the probability, that m1 starts any price figure tends to zero. At the endpoint m1, the notation «:c3/:sL3/:s5».

Wherein:

· If during the formation of m2 crossed the level of the endpoint m1, then before the designation «:c3» should put «x».

· If m1 is longer than m(-1) and m(-3), and m2 crosses the line, connecting the minima m(-2) and m0 for a period of time less than or equal to the formation period m1, then m1, probably, is the fifth wave of the price pattern the stretched fifth, and to its structural list should be added «[:L5]».

· If the total wavelength m3– m5 does not reach 161,8% amplitudes m1 and/or if the level of the starting point m2 (plus one unit of time) achieved over the period, exceeding m2, then cross out «:sL3».

· If the time duration m0 is inferior to the wavelength m(-1) and m1, then you need to delete from the structural list «:s5».

· If m(-2) longer in length m(-1), and designation «:c3» not preceded «x», hence «:c3» need to be removed from the structure list.

· If «:c3» still present in the structure list, m1, then this wave can be an x-wave of complex correction, that is, you must add to the structure list «x:c3?».

### Category ii. m3 from 161,8% up to 261,8% (inclusive) m2.

1. If the length m(-1) is over 261,8% amplitudes m1, then the probability, that m1 is the last segment of any configuration is reduced to zero. Therefore, at the endpoint m1, only two notation should be placed: «:F3/:c3». If, in the process of its development, the wave m2 crosses the level of the endpoint m1, then additionally before «:c3» should put «x».

2. If m1 is more than waves m(-1) and m(-3), and m2 crosses the line, connecting the minima m(-2) and m0 for a time less than or equal to the formation period m1, then m1, Most likely, is the fifth wave of the price pattern the stretched fifth, and you need to add to its structural list «[:L5]».

3. If the amplitude m4 is less than 61,8% wavelength m3, then the probability, that m1 starts any price pattern Elliott tends to zero. At the endpoint m1, the notation «:c3/(:sL3)/:s5».

Wherein:

- If during the formation of m2 crossed the level of the endpoint m1, then before the designation «:c3» should put «x».
- If the total wavelength m3–m5 less than 161,8% amplitudes m1 and/or if the starting point m2 is reached over a period, exceeding m2 formation time, then cross out «:sL3»
- If the formation period m0 is inferior to the wavelength m(-1) and m1, then it is worth deleting from the structural list «:s5».

Also worth noting, that when using the notation «:sL3», triangle, which completes the m2 wave, is non-limiting.

4. If none of the described conditions matches the current market situation, then the endpoint m1 should be denoted by «:F3/:c3 /:sL3/:s5».

Wherein:

- If the forming wave m2 has crossed the level of the endpoint m1, then before the designation «:c3» should put «x».
- If m1 exceeds the waves m(-1) and m(-3), and m2 crosses the trend line, connecting the minimum points m(-2) and m0 for a time less than or equal to the formation period m1, then you need to add to the existing structural list «[:L5]».
- If m1 is shorter than m(-1), as well as m3 and the level of the starting point m3 (plus one unit of time) achieved in a shorter development time m3, then from the list of possible designations you need to cross out «:c3».
- If the amplitude m1 is less than 61,8% length m(-1) and/or the time extent m0 is less than the wavelengths m(-1) and m1, the designation must be removed from the structure list «:s5».
- If m4 is less than 61,8% wave amplitudes m3, then you need to remove the designation «:F3».
- If the initial level m2 (plus one unit of time) takes longer, what formed this wave, it should be removed «:sL3».

### Category iii. m3 over 261,8% m2.

1. If m(-1) is over 261,8% length m1, then m1 is hardly the last segment of any configuration. Therefore, at its end point, it is necessary to place the notation: «:c3/:F3». If, in the process of development, the wave m2 crosses the final level m1, then before «:c3» should add «x».

2. If m(-1) is at least 161,8% length m1, starting point level m0 is reached in a longer time, rather than the formation time m0, and the duration of m1 is 161,8% duration m0 and more, then the sequence of waves m0– m2 almost certainly forms an irregular failed flat. In this case, at the endpoint m1, two notation must be put at once «:c3/(:F3)».

but, if in the course of its development the wave m2 crosses the final level m1, then before «:c3» should add «x».

3. If m1 is more than waves m(-1) and m(-3), and m2 crosses the line, connecting the minima m(-2) and m0 for a time less than or equal to the formation period m1, then m1 is the fifth wave of the price pattern, the stretched fifth, and you need to add to its structural list «[:L5]».

4. If m4 is less than 61,8% wave amplitudes m3, then the probability, that m1 starts any price figure tends to zero. At the endpoint m1, the notation «:F3/:c3/(:s5)».

Wherein:

- In case of confirmation of the option «:F3», m1 starts an elongated flat.
- If m1 is longer than m(-1) and m(-3), and m2 crosses the trend, connecting the minima m(-2) and m0 for a period of time less than or equal to the formation period m1, then m1, probably, is the fifth wave of the price pattern the stretched fifth, and add to the current structure list «[:L5]».
- If the time duration m0 is inferior to the period of wave formation m(-1) and m1, then you need to delete from the structural list «:s5».
- If during formation m2 crosses the final level m1, then before «:c3» should be added «x».

5. If none of the conditions above matches the current market situation, then the endpoint m1 should be denoted by «:F3/:c3 /:sL3/:s5».

Wherein:

- If m1 is longer than m(-1) and m(-3), and m2 crosses the trend, passing through the minimum points m(-2) and m0 for a time less than or equal to the formation period m1, then add to the current structural list «[:L5]».
- If the amplitude m1 is less than 61,8% length m(-1) and/or the time extent m0 is less than the wavelengths m(-1) and m1, the designation must be removed from the structure list «:s5».
- If the length of m4 is less than 61,8% wave amplitudes m3, take away «:F3».
- If the forming wave m2 has crossed the level of the endpoint m1, then before the designation «:c3» should put «x».

Consider the condition (b) rule 4 by example.

M2 wave is from 61,8% up to 100% length m1. So the requirements of rule 4 are met.

Length m0 is 61,8% m1. So the conditions are met (b).

Now we will determine the appropriate category. The amplitude of m3 is from 100% up to 161,8% wavelength m2. So in our case there is a category i condition (b) rules 4.

Starting point level m3 (pink horizontal line on the chart) achieved during the period, inferior or equal to the time of its formation. Since visually comparing periods in this case is not easy, I marked the duration of m3 as a red zone, and duration m2 – green. So in our case there is a place to be paragraph 1. Hence, probability of formation m1, as the end segment of any Elliott price figure is close to zero. Therefore, at the endpoint m1 we put the notation «:F3/:c3».

That’s all. In the next article, we continue our discussion of the fourth rule.