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

15 min readWe continue to consider the rules of the ratio of wavelengths. Next in line is the third rule.

Remind you, that in the second lesson, devoted to the wave theory of NeoWave, I gave a universal qualifier, with which you can easily identify the rule, which should be applied in a specific market situation (cm. post here).

## Rule 3

The wave m2 moves in the opposite direction with respect to m1, and its amplitude is exactly 61,8% length m1. Such a rare ratio indicates the boundary between impulsive and corrective movements, due to which the determination of the structure of m1 can be complicated. 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.

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

1. If the amplitude of m3 is more than 261,8% length m1, then m1, apparently, represents the central part of the rolling correction. But there is a chance, that it can be the end segment of a zigzag complex correction. Therefore, to reflect both options, I recommend adding two notation at the end point m1 at once – «:c3/(:s5)». Remind you, that the basic figures and all the structural designations used in this lesson we examined in the second part.

Wherein:

- If the length m(-1) is over 161,8% amplitudes m1, then from the structural list should be deleted «:s5».
- If the length m(-1) less than 61,8% m3, then m2 can act as the final phase of several price figures at once, differing in scale.

2. If the amplitude of m3 is between 161,8% up to 261,8% (inclusive) length m1, then m1, probably, is the central part of the impulse price pattern «stretched fifth» or rolling correction (I will remind, that the correction is called movable, if it is flat and its wave b ends much higher, than the top of the previous boost) or the first segment of the price figure, entering into complex correction. Therefore, at the endpoint m1, three notation must be placed at once in the order of probability of the hypotheses put forward «:s5/:c3/:F3».

Wherein:

- If m1 is longer than m(-3) cross off the list «:c3».
- If m(-1) longer than m1, then «:s5», standing near the endpoint m1 symbolizes the Zigzag c-wave, part of a complex correction. Respectively, m2, probably, is an x-wave, followed by the a-wave of a tapering triangle.

3. If the price range m3 is from 100% (inclusive) up to 161,8% amplitudes m1, then m1 may be the first segment of the base price figure, which is part of a complex correction, or the third wave of the impulse price figure of the stretched fifth, either c-wave zigzag, entering into a complex correction. In the vicinity of the end of m1, we place the notation for these hypotheses – «:F3/:5/s5».

Wherein:

- If m4 is shorter than m3, cross out «:F3».
- If the formation time m0 is shorter than the wavelengths m(-1) and m1, cross out «:s5».
- If «:s5» remains the current designation and m(-1) exceeds in amplitude m1, then m1 can only be a zigzag c-wave, part of a complex correction, and m2, respectively – x-wave.

4. If m3 is shorter than m1, and its initial level is achieved in less time compared to the time of its formation, then m3, probably, completes a pulsed or complex corrective formation. Therefore, we put the notation «:5/:F3».

5. If m3 is shorter than m1, but its initial level is achieved in a longer time compared with the time of its formation, then m3, probably, is part of a complex correction. Add the notation «:s5».

6. If m3 is shorter than m1 and m4 is shorter than m3, then m1 may be the final link of the zigzag, entering into a complex correction or price pattern of the terminal impulse. Therefore, we add the notation «:5/:F3».

but, if m5 is longer than m3, designation «:F3» should be crossed out.

In all six cases, if m1 is longer than the wavelength m(-1) and m(-3), and m2 wave crosses the trend line, connecting the minima m(-2) and m0, for a period of time, not exceeding the formation time m1, then m1 may be the fifth wave of the price pattern of the stretched fifth wave. So, the designation should be added to the structure list «[:L5]».

Consider the condition (a) third rule by example.

First, let’s check whether the third rule itself works in our situation. As seen in the graph, wave m2 moves in the opposite direction with respect to m1, and its amplitude is exactly 61,8% length m1. For clarity, I marked the start and end points of significant monowaves with filled red circles.

Wave m0, marked with a red line on the chart, less than 38,2% m1. So in this case, the condition (a) rules 3.

Now we will select a condition item corresponding to the market situation (a). Since m3 is shorter than m1 (price and time projections of these waves are enclosed in green and red areas), and her level of her starting point (pink horizontal line) achieved in a much longer time compared to the time of its formation. So the fifth clause of the condition is fulfilled (a). Hence, m3 is part of a complex correction. Add the notation for the final m1 point «:s5».

### Condition (b). m0 from 38,2% up to 61,8% (not including) m1.

1. If m3 is more than 261,8% length m1, then m1 may be the central phase of the failed failed (we will talk about this figure in detail in the following lessons) or complete a zigzag as part of a complex correction. Therefore, at the end of m1 we put «:c3/:s5».

Wherein:

- If the amplitude is m(-1) is over 161,8% length m1, from the structure list should be deleted «:s5»
- If the price extent m(-1) less than 61,8% length m3, then m2 can complete several price figures of various scales.

2. If the amplitude m3 is within 161,8%–261,8% (inclusive) length m1, then m1 may be the central part of the wrong failed, zigzag c-wave, included in the complex correction or the central part of the terminal impulse price figure of the stretched fifth. Respectively, the endpoint m1 should be marked «:c3/:s5», since terminal impulse, and rolling correction are abbreviated «:c3».

but, if m(-1) exceeds m1 in length, that designation «:c3» should be removed.

3. If the length of m3 is from 100% (inclusive) up to 161,8% (not including) amplitudes m1, then m1 can be the first or final zigzag segment as part of a complex correction or the central part of the price pattern of the terminal impulse is a stretched fifth. At the endpoint m1 we put the notation «:5/:s5/:c3».

Wherein:

- If m(-1) longer than m1, cross out from the structure list «:c3».
- If m(-1) longer than m1 and m1 is marked, as «:s5», then this wave, most likely will be a zigzag c-wave as part of a complex correction, and m2, respectively, will be x-wave. Therefore, at the end of m2, you should put «x:c3?».
- If m4 is inferior to m3 in length, remove the designation from the structure list «:5».
- If the initial level is m3 (plus one unit of time) achieved in less time, than the duration of the formation of m3, then the abbreviation should be removed «:s5».

4. If m3 is shorter than m1, and the initial level is m3 (plus one unit of time) achieved in a period less than the time of its formation, then m3, probably, is the ultimate wave of complex correction. Its endpoint should be marked «:5».

Wherein, if m4 reaches the initial level m(-1) during the period, not exceeding 50% wave formation time m(-1)–m3, and also the amplitude is less than 261,8% price extent m1, then m1 is part of the price pattern of the terminal impulse. So, it is required to include the designation in its structural list «:c3».

5. If m3 is shorter than m1, and its initial level is achieved in a longer time compared to the time of its formation, then m1, probably, completes the zigzag as part of a complex correction. Add the notation «:s5».

6. If m3 is shorter than m1 and m4 is shorter than m3, then m1 may be the final link of the zigzag, entering into a complex correction, or price pattern of terminal impulse. Therefore, we add the notation «:5/:F3».

but, if m5 is longer than m3, designation «:F3» should be crossed out.

Consider the condition (b) third rule by example.

The criteria of the third rule are met, since the wave m2 is exactly 61,8% length m1.

Wave m0 is greater than 38,2%, but less than 61,8% m1. So in this case the condition works (b) rules 3.

Now we determine which of the conditions b is satisfied. Price length m1 is 314 points (green area on the chart), and m3 – 262 points (red area on the chart). Since m3 is shorter than m1, and her entry level (pink horizontal line) achieved in a longer time compared with the formation time m1, then m1, probably, completes the zigzag as part of a complex correction. Add the notation «:s5». Moreover, m4 is much shorter than m3, then m1 can be the final link in a zigzag, entering into a complex correction or price pattern of the terminal impulse. Therefore, we add the notation «:F3». However m5 is longer than m3, hence, designation «:F3» should be crossed out.

### Condition (c). m0 from 61,8% up to 100% (not including) m1.

1. If m3 is more than 261,8% length m1, mean m2, probably, completes an irregular failed flat or non-bounding triangle. Therefore, at the end of m1 we put «:c3/:sL3».

Wherein:

- If the amplitude is m(-1) is over 161,8% length m1, from the structure list should be deleted «:sL3»
- If the price extent m(-1) inferior to or equal to 161,8% length m1, and length m(-2) not inferior to 61,8% amplitudes m(-1) then the designation should be removed «:c3».

2. If the amplitude m3 is within 161,8%–261,8% (inclusive) length m1, then m1 may be the central part of the irregular failed flat (I’ll tell you more about this figure in the next lessons, for now, take it as a plane), penultimate phase of a narrowing triangle or part of a complex correction. Respectively, the endpoint m1 should be marked «:F3/:c3/:sL3/:s5».

Wherein:

- If the level of the starting point is m3 (plus one unit of time) achieved over the period, shorter m3 formation time, cross out «:s5».
- If the price extent m(-1) more than 161,8% amplitudes m1, then you need to remove the designation «:sL3».
- If the price extent m(-1) equal or inferior to 161,8% amplitudes m1, then you need to remove the designation «:c3».
- If m4 is shorter than m3, cross out «:F3».

3. If the length of m3 is from 100% (inclusive) up to 161,8% (not including) amplitudes m1, then m1 may be the central segment of the irregular failed flat, the penultimate segment of the tapering triangle, the central phase of the terminal price figure is a stretched fifth or part of a complex correction. At the endpoint m1 we put the notation «:F3/:c3/:sL3/:s5».

Wherein:

- If m4 is shorter than m3, cross out «:F3».
- If the initial level is m3 (plus one unit of time) achieved in less time, than the duration of the formation of m3, then the abbreviation should be removed «:s5».
- If the price extent m(-1) more than 161,8% amplitudes m1, then you need to remove the designation «:sL3».
- If the price extent m(-1) equal or inferior to 161,8% amplitudes m1, then you need to remove the designation «:c3».

4. If m3 is shorter than m1, and the initial level is m3 (plus one unit of time) achieved in a period less than the time of its formation, then m3, probably, is the final phase of the terminal impulse or complex correction. Its endpoint should be marked «:c3/:F3».

but, if the price extent m(-1) inferior to 138.2% or exceeds 261.8% amplitudes m1, means the probability of the option «:c3» decreases sharply and should be enclosed in square brackets.

5. If m3 is shorter than m1, and its initial level is achieved in a longer time compared to the time of its formation, then m1, probably, is a z-wave a-wave or c-wave, part of a complex correction. At the endpoint m1, the notation «:F3/(:s5)».

but, if the wave m4 reaches the level of the starting point m5 (plus one unit of time) for a period of time, inferior to the formation time of m4, cross out from the structure list «(:s5)».

6. If m3 is shorter than m1 and m4 is shorter than m3, then m1 may be the final link of the zigzag or flat, entering into a complex correction of either one of the central phases of the moving tapering triangle or the initial wave of the price pattern of the terminal impulse. Therefore, we add the notation «:s5/:c3/(:F3)».

Wherein:

- If m5 is longer than m3, designation «:F3» should be crossed out.
- If the amplitude is m(-1) more than 261,8% length m1, should be crossed out «:s5».

Consider the condition (c) third rule by example.

The criteria of the third rule are met, since the wave m2 is 61,8% length m1.

m0 is a composite wave, which reaches a little less than 100% length m1. In this case, the condition works (c) rules 3.

M3 is a little over 100% amplitudes m1 (for clarity, I marked the beginning and end of this wave with shaded red circles), which means, in accordance with paragraph 3 of the conditions (c) m1 may be the central segment of the irregular failed flat, the penultimate segment of the tapering triangle, the central phase of the terminal price figure is a stretched fifth or part of a complex correction. At the endpoint m1 we put the notation «:F3/:c3/:sL3/:s5».

Since m4 is shorter than m3, cross out from the structural list «:F3». And since the length m(-1) equal or inferior to 161,8% amplitudes m1, then you need to remove the designation «:c3». Thus, the final structural list m1 will look like this: «:sL3/:s5».

### Condition (d). m0 from 100% up to 161,8% (not including) m1.

1. If m3 is more than 261,8% length m2, mean m1, probably, is the first zigzag segment, the central phase of a plane and failed c or penultimate wave of a triangle. Hence, in the vicinity of its endpoint it is necessary to put «:5/:c3/(:sL3)».

Wherein:

- If the amplitude is m(-1) is over 161,8% or less than 61,8% length m0, from the structure list should be deleted «(:sL3)».
- If m2 covers with less speed, what was its formation, then you need to exclude two notation at once: «(:sL3)» and «:c3».
- If m3 exceeds 161,8% length m1, must be removed from the structure list «:5».

2. If the amplitude m3 is within 161,8%–261,8% (inclusive) length m2, then m1 may be the central part of the plane with failed c, the penultimate wave of the tapering triangle or the initial part of the zigzag.

Respectively, the endpoint m1 should be marked «:c3/:sL3/:5».

Wherein:

- If the price extent m(-1) less than 61,8% or more 161,8% amplitudes m0, then it is necessary to pay attention to the amplitude m1.
- If she is less than 38,2% total wavelength m(-3)–m0, need to be removed from the structure list «:sL3».
- If the length m1 is between 38,2% (not including) up to 61,8% (not including) total wavelength m(-3)–m(-1), then «:sL3» need to be enclosed in parentheses, to note the relatively low probability of this option.
- If the length m(-1) makes from 61,8% up to 161,8% amplitudes m0, cross out «:c3».
- If the price length m4 is less than 61,8% amplitudes m0, enclose in parentheses «:5».

3. If the length of m3 is from 100% (inclusive) up to 161,8% (not including) amplitude m2, then m1 can be the first zigzag phase or be part of a triangle. At the endpoint m1 we put the notation «:5/(:c3)/[:F3]».

Wherein:

- If m4 is longer than m3, cross out «(:c3)» and «[:F3]».
- If m4 is shorter than m3, m5 reaches m4 starting point in time, inferior to the formation time of m4 and m5 is equal to or exceeds the length of m1 and develops in comparison with it under more «vertical» angle, cross out «:5».

Consider the condition (d) third rule by example.

M2 wave is 61,8% length m1, which is a composite wave and for clarity is marked by red filled circles. Hence, rule 3 criteria are met.

m0 is over 100%, but less than 161,8% length m1. So in this case the condition works (d) rules 3.

Amplitude m3 is within 161,8%–261,8% length m2. So our case should be attributed to clause 2 of the condition (d) and at the endpoint m1 put the notation «:c3/:sL3/:5».

According to the rules, described in paragraph 2, since the length m(-1) makes from 61,8% up to 161,8% amplitudes m0, cross out «:c3». And since the length of m4 is less than 61,8% amplitudes m0, what is visible even to the naked eye, enclose in parentheses «:5».

### Condition (e). m0 from 161,8% up to 261,8% (inclusive) m1.

1. If m3 is more than 261,8% length m2, mean m1, most likely the first zigzag segment, the central phase is flat and failed c, completing a complex correction (with x-wave missing in the center of m0) either the penultimate wave of the triangle. Hence, in the vicinity of its endpoint it is necessary to put «:5/:c3/(:sL3)».

Wherein:

- If the amplitude is m(-1) is over 161,8% or less than 61,8% length m0, from the structure list should be deleted «(:sL3)».
- If m2 is covered at a slower rate, what was its formation, then you need to exclude two designations at once: «(:sL3)» and «:c3».
- If m3 exceeds 161,8% length m1, need to be removed from the structure list «:5».

2. If the amplitude m3 is within 161,8%–261,8% (inclusive) length m2, then m1 may be the initial zigzag phase of the central part of the plane with the failed c, which completes a complex correction (with «invisible» x-wave in the center m0). Respectively, the endpoint m1 should be marked «:5/:c3» and put a point in the center of the wave m0, add a symbol to the right of it «x:c3?», and left – «:s5?».

Wherein:

- If the starting point m2 is reached in a period of time, exceeding the time of its formation, the designation should be deleted from the structure list «:c3».
- If the amplitude m3 is greater than 161,8% length m1, must be removed «:5».

3. If the length of m3 is from 100% (inclusive) up to 161,8% (not including) amplitude m2, then m1 may be the first phase of a zigzag or triangle. At the endpoint m1 we put the notation «:5/(:F3)».

but, if m4 is longer than m3 and is monowave, cross out «(:F3)».

Consider the condition (e) third rule by example.

M2 wave is 61,8% length m1. So the criteria of the third rule are met.

Length m0 ranges from 161,8% up to 261,8% length m1. In this case, the condition works (e) rules 3.

In our case, the length of m3 is from 100% up to 161,8% amplitude m2 – the third clause of the condition works (e) and m1 may be the first phase of a zigzag or triangle. At the endpoint m1, we add the notation «:5/(:F3)».

### Condition (f). m0 over 261,8% m1.

1. If m3 is more than 261,8% length m2, mean m1, probably, is the first zigzag segment, the central phase is flat and failed c, completing a complex correction (with x-wave missing in the center of m0). Hence, in the vicinity of its endpoint it is necessary to put «:5/(:c3)».

Wherein:

- If m2 is covered at a slower rate, what was its formation, then you need to exclude «(:c3)».
- If m3 exceeds 161,8% length m1, need to be removed from the structure list «:5».
- If at the endpoint m1 there is a notation «(:c3)», as well as price projections m(-1) and m1 do not even partially overlap, then the middle of m0 should be marked with a dot, add a symbol to the right of it «x:c3?», and left – «:s5». This will indicate a likely presence «disappeared» x-waves in the center m0.

2. If the amplitude m3 is within 161,8%–261,8% (inclusive) length m2, then m1 may be the initial phase of the zigzag, central part flat with failed with, which completes a complex correction (with «invisible» x-wave in the center m0). Respectively, the endpoint m1 should be marked «:5/:c3».

Wherein:

- If the amplitude m3 is greater than 161,8% length m1, take away «:5».
- If the duration of m3 exceeds the duration of m2, need to cross out «:c3».
- If «:c3» is the designation m1 and price projections m(-1) and m1 do not even partially overlap, then the middle of m0 should be marked with a dot, add a symbol to the right of it «x:c3?», and left – «:s5».

3. If the length of m3 is from 100% (inclusive) up to 161,8% (not including) amplitude m2, then m1 may be the first phase of a zigzag or triangle. At the endpoint m1 we put the notation «:5/(:F3)».

but, if m4 is longer than m3 and is monowave, cross out «(:F3)».

Unfortunately, cases of fulfillment of the condition (f) are very rare, therefore, I could not find an example suitable for this case on the BTCUSD chart.

That’s all. In the next article, we will continue to study the works of Glenn Neely and consider the fourth rule of the ratio of wavelengths and the conditions for its fulfillment.