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.

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.

1^st 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.)

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

3^rd 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:

4^th 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).

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.

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

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

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

4^th 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).

Gann also made a list of top and bottom formations that also agreed with Elliott shapes and common technical analysis formations (double tops, Elliott truncated fifth waves, etc.).

Gann said that after a prolonged advance or at the end of a bull trend, a market could often make a single, sharp top with only small reactions lasting, perhaps, 2 to 10 bars. This is followed by a sharp decline. It is safe to sell on the subsequent rally or secondary rally (a lower high, or Wave 2 or Wave B). More or safer positions can be added once the market breaks under the last leg of the "A" or the bottom of the first sharp decline.

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After a substantial advance where the market makes a top, reacts for several bars, then rallies again to around the same level, an ‘M’ top or Double Top is formed. (This agrees with several Elliott terms such a Waves A and C hitting near the same level in a Flat Correction, or Wave 5 hitting near the top of Wave 4 in a Truncated Fifth Wave.) When the market falls below the low of the ‘M’ it is safe to go short.

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This occurs when a market makes 3 tops near the same level. Often the 2^nd and 3^rd tops will be slightly lower. (In Elliott terms, Waves A and C of the following correction retracing near 100% of Wave 1 of the decline? Or a corrective triangle?) When made at tops after a large advance, ‘MA’ tops can signal the start of a major decline. It is safest to sell once the market breaks under the last bottom, whether that is under the low of the ‘A’ or under the low of the ‘M’.

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This formation occurs when a market makes 4 tops at around the same level or slightly lower. (A lot of tops, probably forming an Elliott combination, such as a W, X, Y, Double-Three.) It is safest to sell short once the market breaks under the low of the second ‘M’ or the last reaction.

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A ‘W’ Bottom or Double Bottom forms when a market makes a bottom, rallies for several bars, declines and makes a bottom at around the same level the second time, and advances and crosses the previous top. It should be safe to buy the market once it has moved above the top of the ‘W’.

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‘WV’ Bottom or Triple Bottom

A Triple Bottom or ‘WV’ Bottom is where the market makes either a third bottom slightly above the previous two bottoms, or three bottoms around the same level. It is safe to buy once the market has moved above the second top of the ‘W’.

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Above, I have described some of Gann’s top and bottom chart patterns. Many of these you have seen before (under their Elliott names) and below I describe why some of these shapes make up my favourite chart patterns that regularly signal major reversals and excellent trading opportunities.

You will also see how many of the indicators I have shown in the course will add weight to entering/exiting positions when these chart formations form.

First, here is my most favourite chart pattern:

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A Saucer Top or Bottom, or Rounding Top or Bottom, is a term used to describe a gradual, progressive and fairly symmetrical change in trend direction that lasts for a fairly long period of time (e.g. 20-50 bars?). Prices lose momentum towards the top of the trend.

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A Flag is a term used by many technical analysts for an Elliott congestion area (e.g. a Wave 2 or 4) which forms after a trending move in price.

It is so named because the pattern occurs after a strong, trending move that can be near vertical. This sharp move resembles a Flagpole with the following price-congestion drifting away between two parallel lines, forming the Flag.

Measure the height of the Flag’s congestion area and, once the breakout occurs, move the flagpole to the point of breakout to forecast the next top or bottom.

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