In technical analysis, it is a naturally occurring trading pattern present in all financial markets. The pattern is composed of five waves showing supply and demand and a fight towards an equilibrium price. These patterns can develop over short- and long-term time frames such as minutes or weeks and are used to predict where a price is heading and when it will get there. Source: www.harmonictrader.com If identified correctly, Wolfe waves can be used to accurately predict the scope (equilibrium price) of the underlying security. To identify Wolfe waves, they must have the following characteristics:Waves 3-4 must stay within the channel created by 1-2Wave 1-2 equals waves 3-4 (shows symmetry)Wave 4 is within the channel created by waves 1-2There is regular time between all wavesWave 5 exceeds trendline created by waves 1 and 3 and is the entry pointThe estimated price is a price along the trendline created by waves 1 and 4 (point 6).