Corrective Wave
A corrective wave moves against the direction of the trend at the next larger degree and subdivides into a three-wave structure. These waves are labeled with letters: A-B-C at their simplest. Corrective waves appear as Waves 2 and 4 within an impulse and as the entire structure in bear markets. They come in three main families: zigzags for sharp corrections, flats for sideways corrections, and triangles for consolidating corrections. Complex corrections combine these simple patterns with X waves. Corrective waves never have five sub-waves in the direction of the correction, which is how you distinguish them from motive waves. Trading corrective waves is harder than trading motive waves because the patterns are more varied and harder to predict in real time. The best strategy is usually to identify when a correction is nearing completion and position for the next motive wave. Wave 2 corrections tend to be sharper and deeper, while Wave 4 corrections tend to be more complex and sideways, following the alternation guideline.
After a strong five-wave rally in Amazon from $85 to $145 (Wave 1), a corrective Wave 2 unfolds as a zigzag: Wave A drops to $120, Wave B bounces to $135, and Wave C finishes at $108. That's a 61.8% retracement of the Wave 1 advance, which is textbook for a second wave correction.