Theory named after Ralph Nelson Elliott, who concluded that the movement of the stock market could be predicted by observing and identifying a repetitive pattern of waves. Watch: Eilliott Wave Theory Basics Taobiz explains Elliott Wave Theory Based on rhythms found in nature, the theory suggests that the market moves up in a series of five waves and down in a series of three waves. The key difference between the Elliott Wave Principle and other cyclical theories is that this theory suggests no absolute time requirements for a cycle to complete.