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Technical Analysis - Menu

1. Technical Analysis - Elliott Wave, Gann and Chart Patterns

2. Elliott Wave Introduction

3. Secrets of Price Bars

4. Fibonacci Number Sequence

5. Market Cycles and Fibonacci

Gann and Elliott Wave Count Similarities

Elliott used numbers and letters to count and label the trends and reactions of a market (1, 2, 3, 4, 5, A, B, C, etc.). From Gann’s work, it is obvious that he recognised many of the same shapes forming on price charts, although he used different ways to describe them.

In this section of analysis on Elliott and Gann, I have described below how the two geniuses of technical analysis noticed the exact same patterns on price charts:

Where Elliott labelled the waves of a trending market as having five waves, Gann described the same, noticeable patterns by calling each section a Campaign.


Gann Bull Market Campaign

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Figure 264: Gann’s Bull Market Campaign.

1st Section: A new bull market begins with an advance from a final bottom followed by a reaction. (In Elliot terms, these are Waves 1 and 2.)

2nd Section: An advance to higher levels, followed by a reaction. (In Elliott terms, Waves 3 and 4.)

3rd Section: An advance to a new high. In many cases, Gann said that this would end the campaign. (In Elliott terms, Wave 5.)

An alternative, "bullish" shape recognised by Gann is the same as an Elliott correction against a bear trend: a Zigzag correction where Wave A is counted as one wave and Wave C is counted as a five.

(In large corrective Zigzags, the first wave – Wave A – is often fast moving and the sub-waves are lost or hard to count. But Wave Cs regularly show a visible 5-count.) Gann described the "bullish" shape making a Fourth Section:

figure265.gif (5609 bytes)

Figure 265:

4th Section: Gann said that if the market makes a fourth run to new highs, it is an important section to watch for a change in trend at the fourth high. (In Elliott terms, this could be Wave A, followed by a 5-wave, Wave C.) This ends a typical Elliott Zigzag, which would lead to a strong decline to new lows. (Alternatively, Gann could have been talking about an extended wave, such as a third. E.g. in the diagram above, Waves A and B could be Waves 1 and 2. The 1,2,3,4,5 count could be an extended third wave. After this, Wave 4 would fall and Wave 5 may not get much higher than the end of Wave 3. This can happen quite often.)

Gann also said that campaigns of short duration would often run out in 2 sections, especially if the move was from a sharp bottom. In Elliott terms, this would be a typical 3-wave Zigzag correction of a SMALL DEGREE, where the sub-waves would be lost or hard to count (without zooming in on a smaller timeframe price chart).

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Figure 266: Gann’s short campaign is the same as an Elliott Zigzag that would lead to more lows.


Gann Bear Market Campaign

Gann’s Bear Market Campaign is opposite to a bull market campaign, which also agrees with Elliott’s interpretation that a market can make the same patterns, impulses, and actionary waves, with upward corrections, in a declining market.

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Figure 267: Gann’s Bear Market Campaign.

1st Section: A sharp decline changes the main trend followed by a rally. (Elliott Waves 1 and 2.)

2nd Section: A second decline to lower levels followed by a moderate rally. (In Elliott terms, waves 3 and 4.)

3rd Section: A third decline to lower prices. In many cases, Gann said, this would end the campaign. (In Elliott terms, Wave 5.)

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4th Section: If the market makes a fourth run to new lows, Gann said that it is an important section to watch for a change in trend at the fourth low. In Elliott terms, this could be Wave A, followed by a 5-wave, Wave C correction of LARGE DEGREE where the sub-waves will be visible. This would usually end the corrective pattern and lead to a return to new highs.

Gann also said that minor bear campaigns could run a short duration. This again would take the form of an A, B, C corrective Zigzag of a SMALL DEGREE where the sub-waves would often be invisible (without zooming in on a smaller timeframe chart).

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