# Elliott wave

The

**Elliott wave** theory is the basis of a widely-used

technical analysis technique invented by R. N. Elliott in

1939. It is based on the observation that markets exhibit well-defined wave patterns that can be used to predict market direction. The Elliott wave theory states that stock prices are governed by cycles which adhere to the

Fibonacci series [0,1,2,3,5,8,13,21,...].

According to the Elliott wave theory, markets move in a predetermined number of waves up and down. Specifically, markets move in five waves up and three waves down and price charts have a self-similar fractal geometry.