Zigzag
A zigzag is a sharp three-wave corrective pattern labeled A-B-C. It is the most common and most recognizable correction in Elliott Wave analysis. The internal structure is 5-3-5, meaning Wave A contains five sub-waves, Wave B contains three sub-waves, and Wave C contains five sub-waves. Because waves A and C are both five-wave structures, zigzags have an impulsive feel to them. They are fast, directional, and they cover a lot of price distance. Zigzags typically retrace 50% to 61.8% of the prior impulse wave. Wave B within a zigzag usually retraces 38.2% to 61.8% of Wave A and does not retrace beyond the start of Wave A. Wave C commonly equals Wave A in length or extends to 161.8% of Wave A. You see zigzags most often in Wave 2 positions, where the correction tends to be sharp and deep. They also appear in Wave A of larger corrections and as components within complex patterns. When you identify a zigzag forming, you know the correction will be relatively quick but painful for anyone positioned against it.
Netflix drops from $700 to $620 in Wave A (five sub-waves visible on the hourly chart). Wave B rallies to $650, retracing about 38% of Wave A in three sub-waves. Wave C then drops from $650 to $570, also in five sub-waves. Wave C traveled $80, exactly equal to Wave A's $80 decline. The entire zigzag retraced 61.8% of the prior impulse wave. A trader who recognized the 5-3-5 structure after Wave A set a limit buy at $575 (near Wave C equality) and caught the reversal within $5 of the low.