Volume, Fibonacci & Elliott Wave

Q1. (3 marks)

• Volume = the total number of shares (or contracts) traded during a given period. (1)
• Rising price + rising volume confirms: (i) the strength/conviction behind the trend (1); (ii) genuine buying interest / trend likely to continue (healthy uptrend). (1) Why: Volume measures participation; agreement between price and volume validates a move.

Q2. (4 marks)

• Spread = the range of a bar = High − Low (distance between the bar's high and low). (2)
• A high-spread bar on high volume closing near its high signals strong demand / buying pressure — smart money buying; typically bullish continuation or the start of an up-move. (2) Why: Wide range + high volume + close at top = buyers overwhelmed sellers.

Q3. (4 marks)

• Accumulation = buying by informed/smart money over time, usually at lows in a range, often when prices are flat or falling — building positions. (2)
• Distribution = selling/unloading by smart money at highs, offloading to the public. (2) Why: Accumulation precedes markups; distribution precedes markdowns.

Q4. (4 marks)

• Common retracement ratios: 38.2%, 50%, 61.8% (also 23.6%, 78.6% accepted). (2, one per two correct)
• Origin of 61.8%: ratio of a Fibonacci number to the next number in the sequence converges to $1/\phi \approx 0.618$, where $\phi = \frac{1+\sqrt5}{2}$. (2) Why: Fibonacci ratios derive from the golden ratio limits of the sequence.

Q5. (6 marks) — Range = $180 - 100 = 80$. Retracement level = High − (ratio × Range).

• (a) 38.2%: $180 - 0.382 \times 80 = 180 - 30.56 = \mathbf{149.44}$ (2)
• (b) 50%: $180 - 0.50 \times 80 = 180 - 40 = \mathbf{140}$ (2)
• (c) 61.8%: $180 - 0.618 \times 80 = 180 - 49.44 = \mathbf{130.56}$ (2) Why: Retracements pull back a fraction of the prior advance.

Q6. (4 marks) — Extension from swing low, 161.8%: $100 + 1.618 \times 80 = 100 + 129.44 = \mathbf{229.44}$ Why: Extensions project beyond the 100% move to give profit targets. (4)

Q7. (4 marks)

• A complete cycle = 5-wave impulse (motive) phase followed by a 3-wave corrective phase (5-3 pattern). (2)
• Impulse = 5 waves (1-2-3-4-5); Correction = 3 waves (A-B-C). (2)

Q8. (4 marks)

• Wave 1: motive (0.8)
• Wave 2: corrective (0.8)
• Wave 3: motive (0.8)
• Wave 4: corrective (0.8)
• Wave 5: motive (0.8) Why: Odd waves move with the trend (motive); even waves counter it.

Q9. (4 marks — any 3, ~1.3 each)

1. Wave 2 never retraces more than 100% of Wave 1.
2. Wave 3 is never the shortest of the three impulse waves (1, 3, 5).
3. Wave 4 never overlaps the price territory of Wave 1 (in a standard impulse). Why: These are the inviolable rules that validate a wave count.

Q10. (3 marks — any 2)

• Subjectivity: wave counts differ between analysts; not a precise/objective method. (1.5)
• Difficulty in real-time identification — waves are clear in hindsight but hard to label live; frequent re-labelling. (1.5)
• (Also accepted: no fixed time element, patterns can extend indefinitely.)

[
  {"claim":"38.2% retracement of 100->180 is 149.44","code":"result = (180 - 0.382*(180-100)) == 149.44"},
  {"claim":"50% retracement is 140","code":"result = (180 - 0.50*(180-100)) == 140"},
  {"claim":"61.8% retracement is 130.56","code":"result = abs((180 - 0.618*(180-100)) - 130.56) < 1e-9"},
  {"claim":"161.8% extension from low 100 is 229.44","code":"result = abs((100 + 1.618*(180-100)) - 229.44) < 1e-9"},
  {"claim":"Golden ratio reciprocal approximates 0.618","code":"phi=(1+sqrt(5))/2; result = abs(float(1/phi) - 0.618) < 0.001"}
]