The usefulness of breaking down the larger impulse wave into its component sub waves lies in the fact that we can (a) apply the same techniques that we use in the larger waves just as well to the smaller waves and (b) we can take quick corrective action if any of the rules and guidelines of the Elliott Wave Principle are violated in these smaller waves, thereby limiting any losses from a wrong trade to something very small.
The Elliott Wave analysis of General Electric Company shows that the target for the fifth sub wave is likely to fall just about the $24.30 level that we anticipated previously.
A very important clue that often gives us significant profits is when an extended fifth wave completes its run. According to the Elliott Wave Theory, once an extended fifth wave ends, we should look for a swift correction that will take the price back to the level of the sub wave 2 within the extended fifth. In the case of General Electric, that level lies at around $19.40. If you are not convinced of this fact, see the numerous examples in this blog.
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