Volume, Fibonacci & Elliott Wave

Question 1 (14 marks)

Range of move $= 180 - 120 = 60$. Retracement level $= \text{High} - (\text{ratio} \times \text{range})$.

(a) (6 marks — 2 each)

• 38.2%: 180 - 0.382 \times 60 = 180 - 22.92 = \mathbf{\157.08}$
• 50%: 180 - 0.50 \times 60 = 180 - 30 = \mathbf{\150.00}$
• 61.8%: 180 - 0.618 \times 60 = 180 - 37.08 = \mathbf{\142.92}$

Why: retracements measure how far price gives back a completed move; deeper ratios sit lower in an uptrend pullback.

(b) (5 marks)

• The **50% level (\150.00$)** falls inside the$$150–$154$ support zone. (2 marks)
• Reasoning (3 marks): When a Fibonacci level coincides with independent horizontal support, two unrelated methods point to the same price ("confluence"). More market participants place orders there, raising the odds of a bounce and giving a tighter, better-defined risk level than an isolated Fib line.

(c) (3 marks)

• Failure level = 100% retracement = the swing low \mathbf{\120.00}$. (2 marks)
• A break below \120$ means the entire impulse is retraced; the prior up-move is invalidated and the pullback should no longer be treated as a mere correction — trend structure has broken. (1 mark)

Question 2 (12 marks)

Impulse leg (Wave 1) length $= 180 - 120 = 60$. Extensions are projected upward from the Wave 2 low (\146.00$).

(a) (8 marks — 4 each)

• 100% extension: 146 + 1.000 \times 60 = 146 + 60 = \mathbf{\206.00}$
• 161.8% extension: 146 + 1.618 \times 60 = 146 + 97.08 = \mathbf{\243.08}$

Why: extensions project a proportional multiple of the prior impulse from the correction low to estimate the next target.

(b) (4 marks)

• Recommend the 161.8% extension (\243.08$) as the primary target because it is the most common Wave 3 objective and offers a realistic, statistically frequent reward. (2 marks)
• Factor that shifts the choice (2 marks): if momentum/volume is exceptionally strong (extended third wave) or the stock shows a strong trend with no nearby resistance, scaling toward the 261.8% target becomes justified; conversely overhead resistance below 161.8% would argue for a nearer target.

Question 3 (14 marks)

(a) (8 marks — MFM 1 each ≈4, MFV ≈4)

$\text{MFM} = \frac{(C-L)-(H-C)}{H-L}$

• Day 1: $H-L=2.5$; $(C-L)=2.3$, $(H-C)=0.2$; MFM $=\frac{2.3-0.2}{2.5}=\frac{2.1}{2.5}=0.840$; MFV $=0.840\times1.0=\mathbf{+0.840M}$
• Day 2: $H-L=2.0$; $(C-L)=1.9$, $(H-C)=0.1$; MFM $=\frac{1.9-0.1}{2.0}=\frac{1.8}{2.0}=0.900$; MFV $=0.900\times1.6=\mathbf{+1.440M}$
• Day 3: $H-L=2.0$; $(C-L)=0.3$, $(H-C)=1.7$; MFM $=\frac{0.3-1.7}{2.0}=\frac{-1.4}{2.0}=-0.700$; MFV $=-0.700\times2.4=\mathbf{-1.680M}$
• Day 4: $H-L=2.2$; $(C-L)=0.3$, $(H-C)=1.9$; MFM $=\frac{0.3-1.9}{2.2}=\frac{-1.6}{2.2}=-0.727$; MFV $=-0.727\times2.9=\mathbf{-2.109M}$

(b) (2 marks) A/D $= 0.840 + 1.440 - 1.680 - 2.109 = \mathbf{-1.509M}$ (≈ $-1.51$M).

(c) (4 marks)

• Signals distribution. (2 marks)
• Justification (2 marks): the heaviest volume (Days 3–4, 2.4M then 2.9M) arrives on down/rejection bars that close near their lows, so the large volume is on the selling side — sellers are unloading (distributing) into the rally, and the negative cumulative A/D confirms net outflow despite prices having been near the top.

Question 4 (12 marks)

Wave sizes (absolute price moves):

• W1 $=14-10=4$, W2 $=14-11=3$, W3 $=20-11=9$, W4 $=20-13=7$, W5 $=22-13=9$.

(a) (9 marks — 3 per rule)

• Rule 1 (W2 ≤ 100% of W1): W2 retraces from 14 to 11 = 3 points out of W1's 4 points = 75% ≤ 100%. Not broken. ✔
• Rule 2 (W3 not shortest of 1/3/5): W3 = 9; W1 = 4; W5 = 9. W3 is not the shortest. Not broken. ✔
• Rule 3 (W4 must not overlap W1 territory): W1 spans \10–$14$. W4 falls from$$20$to$$13$, and$$13 < $14$, so W4 enters W1's price territory. RULE BROKEN. ✘

Verdict: INVALID — the count violates the no-overlap rule (Wave 4 low at \13$overlaps Wave 1's high of$$14$). (Award full marks for correctly identifying this single broken rule with numbers.)

(b) (3 marks) Any valid fix, e.g.: end Wave 4 at \15$(or any level above$$14$) instead of$$13$, so it no longer overlaps Wave 1 — e.g. W4:$$20 \to $15$, W5:$$15 \to $22$. This keeps the trend up and satisfies all three rules. (Accept alternatives such as shrinking W3's/relabelling that removes overlap.)

Question 5 (8 marks)

(a) (4 marks — 2 each) Any two of:

• Subjectivity / multiple valid counts: analysts disagree on wave labelling; the same chart supports several counts, so predictions are not unique.
• Retrospective clarity: waves are often only clear after they complete, limiting real-time value.
• No fixed timeframe: rules say what patterns are, not when they resolve.
• Frequent re-labelling: counts get revised as price moves, reducing tradeable precision.

(b) (4 marks)

• Elliott Wave identifies where a Wave 2 correction should terminate (structure after a 5-wave or clear impulse). (1)
• Fibonacci narrows the price — Wave 2 typically retraces 50–61.8% of Wave 1, giving a specific entry zone. (1–2)
• Volume confirms conviction — declining volume into the Wave 2 low signals selling exhaustion, and a volume expansion on the turn confirms buyers stepping in for Wave 3. (1)
• Together, agreement across all three (right structure + Fib level + volume confirmation) raises the probability of a genuine Wave 2 low. (1)

[
  {"claim":"Q1 retracement levels 157.08, 150, 142.92","code":"h=180;l=120;r=h-l;lv=[h-x*r for x in (Rational(382,1000),Rational(1,2),Rational(618,1000))];result=[float(v) for v in lv]==[157.08,150.0,142.92]"},
  {"claim":"Q2 extensions 206 and 243.08","code":"base=146;leg=60;e100=base+1*leg;e1618=base+Rational(1618,1000)*leg;result=(float(e100)==206.0 and float(e1618)==243.08)"},
  {"claim":"Q3 A/D after day4 approx -1.509M","code":"data=[(52.0,49.5,51.8,1.0),(53.0,51.0,52.9,1.6),(53.5,51.5,51.8,2.4),(52.2,50.0,50.3,2.9)];tot=sum((((C-L)-(H-C))/(H-L))*V for H,L,C,V in data);result=abs(float(tot)-(-1.509))<0.01"},
  {"claim":"Q4 Wave4 low 13 overlaps Wave1 high 14 (rule broken)","code":"w1_high=14;w4_low=13;result=(w4_low<w1_high)"}
]