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Corrective

Flat

A flat is a three-wave corrective pattern labeled A-B-C with an internal structure of 3-3-5. Wave A subdivides into three waves, Wave B also subdivides into three waves and retraces most or all of Wave A, and Wave C is a five-wave impulse. Flats produce more sideways movement than zigzags because Wave B recovery nearly erases Wave A's progress before Wave C drops. There are three varieties. A regular flat has Wave B ending near the start of Wave A and Wave C ending near the end of Wave A. An expanded flat has Wave B exceeding the start of Wave A and Wave C falling well beyond Wave A's end. A running flat has Wave B exceeding the start of Wave A but Wave C failing to reach Wave A's end, which is the rarest and most bullish variant. Flats tend to appear in Wave 4 and Wave B positions. Recognizing whether you're in a flat or a zigzag early changes your target expectations. With flats, the damage is more about time than price, so if you're positioned with the larger trend, patience gets rewarded.

EXAMPLE

Crude oil is in a flat correction during Wave 4. Wave A drops from $80 to $72 in three waves. Wave B rallies back to $79.50, recovering almost all of Wave A. Then Wave C drops sharply as a five-wave impulse to $71, slightly beyond Wave A's low. The whole correction took six weeks but only covered $9 from high to low. That's a regular flat.

RELATED TERMS

Expanded Flat
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Regular Flat
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Running Flat
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Fibonacci RetracementAll TermsFractal
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