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A 1-2/1-2 structure is an indication that the larger degree impulse wave in development is extending. All extended waves are going to have a 1-2/1-2 structure. Typically, you will find them in wave 3's, but they certainly can develop in waves 1 and 5.
The 2nd Wave 1 almost always exceeds the first wave 1.
The 2nd Wave 2 almost never moves beyond the first wave 2 pivot.
The 2nd Wave 1-2 structure most
often does not exhibit alternation.
You might end up with two wave 2
zigzags, or 2 flats. This can
be a tip-off that you are not
looking at wave 4, but rather a
second 2nd wave.
The second 2nd wave is typically not as steep as the first 2nd wave.
StructureThe 1-2/1-2 structure is not difficult to identify, even in real time. A typical impulse wave normally forms with a wave 1 of some indeterminate distance, and a wave 2 retracement typically of 50% to 61.8% of the wave 1 movement. Then, wave 3 will take off in a very impulsive manner, creating quite a distance between the wave 1 pivot and where the wave 3 pivots. With a 1-2/1-2 structure, price most often moves back into the territory of the previous wave 1-2 range. Doesn't have to, but it does need to be close.
The 2nd wave 1-2 structure needs to be similar in proportions to that of the first 1-2 structure, not taking much more, if any more, time than the first. Remember, you are actually
seeing the development of a smaller degree impulse wave, so expect it to be a bit smaller than the larger degree structure.
There are two types of 1-2/1-2 combinations.
The short advance 1-2/1-2:
The short advance 1-2/1-2 occurs when the wave 1 pivot is overcome in what you think is to be wave 3, but price stops shortly after surpassing the wave 1 pivot and returns back into the range of waves 1-2. Wave 3 is supposed to fly. When you find yourself frustrated because the price isn't moving as expected, that is the point you should suspect another 1-2 is in the works.
The deep retracement 1-2/1-2
There are times when wave 3 develops normally and you have at least a 1.618 extension beyond wave 1. Wave 3 looks good, but price then proceeds to pull back into the range of waves 1-2. You might be tempted to call the structure wave 4 and label the wave as diagonal, but if you can clearly identify 5 waves, rather than 3, in wave 1 you are more likely looking at a 1-2/1-2.
Not every double pair of pivots is a 1-2/1-2, however. Here are some important considerations to keep you on track. The 2nd wave 1 must advance beyond the pivot of the previous wave 1.
The 2nd wave 2 pivot must not move beyond the previous wave 2 pivot. It either of these is not true, then you are likely still seeing the first wave 2 developing or a B wave triangle working in the 1st Wave 2.