Node 1 (N1 / S1) - The Trend Start Point Node 1 is the potential starting point of a new trend after a Reversal.
Identification Conditions: Starting Point:
At the end of a confirmed uptrend: The highest price point is considered the potential N1.
At the end of a confirmed downtrend: The lowest price point is considered the potential S1.
This point marks the beginning of a potential new Sequence.
Need for Retracement:
Node 1 must be followed by a significant price Retracement against the direction of the potential new trend.
Confirmation Condition:
Node 1 is only confirmed when this initial retracement occurs, and then the price moves in the direction of the new trend, past the point where the retracement ended.
Uptrend Example: Price moves up from S1 and forms the N1 peak, then retraces (e.g., to a lower point). If the price then moves up again and passes the N1 peak, S1 (the start point of the uptrend) and N1 are confirmed as the first peak.
Downtrend Example: Similar to the uptrend case.
(Schematic Description of Node 1):
Uptrend: A bottom point is established (Point T or S1). Price moves up from it towards a peak (N1). Then a downward retracement occurs. Indicated by a dashed line for confirmation, the price must pass the N1 peak.
Downtrend: A peak is established (Point T or N1). Price moves down from it towards a bottom (S1). Then an upward retracement occurs. Indicated by a dashed line for confirmation, the price must pass the S1 bottom.
Node 2 (N2 / S2) - Trend Continuation Node 2 continues the trend that started with Node 1.
Identification Conditions: Sequence:
It takes place after Node 1.
Trend Progression:
Node 2 must indicate trend progression.
In an uptrend, N2 must be higher than N1.
In a downtrend, S2 must be lower than S1.
Need for Retracement and its Size:
Node 2 must be followed by a retracement.
This retracement must be greater than or equal to the retracement that occurred after Node 1.
Validity Check:
The retracement after Node 2 must not break the initial starting point of Node 1 (the initial bottom in an uptrend or the initial peak in a downtrend).
Confirmation Condition:
Node 2 is only confirmed when the price moves in the trend direction, past the endpoint of Node 2 (i.e., past N2 in an uptrend or past S2 in a downtrend).
Internal Structure:
Node 2 is always considered three-nodal in its structure.
(Schematic Description of Node 2):
Uptrend: The Node 1 structure (S1-N1-Retracement) is established. Then, another upward move goes higher than N1 (N2) is formed. A downward retracement occurs (down to S2) which is greater than or equal to the previous retracement, but does not go below the initial S1. Indicated by a dashed line for confirmation, the price must pass the N2 peak.
Downtrend: The Node 1 structure (N1-S1-Retracement) is established. Then, another downward move goes lower than S1 (S2) is formed. An upward retracement occurs (up to N2) which is greater than or equal to the previous retracement, but does not go above the initial N1. Indicated by a dashed line for confirmation, the price must pass the S2 bottom.
(Second instance of) Node 2 (N2 / S2) - Trend Continuation (This section is a duplicate of the previous "Node 2" section. The translation remains the same.)
Node 2 continues the trend that started with Node 1.
Identification Conditions: Sequence:
It takes place after Node 1.
Trend Progression:
Node 2 must indicate trend progression.
In an uptrend, N2 must be higher than N1.
In a downtrend, S2 must be lower than S1.
Need for Retracement and its Size:
Node 2 must be followed by a retracement.
This retracement must be greater than or equal to the retracement that occurred after Node 1
Validity Check:
The retracement after Node 2 must not break the initial starting point of Node 1 (the initial bottom in an uptrend or the initial peak in a downtrend).
Confirmation Condition:
Node 2 is only confirmed when the price moves in the trend direction, past the endpoint of Node 2 (i.e., past N2 in an uptrend or past S2 in a downtrend).
Internal Structure:
Node 2 is always considered three-nodal in its structure
(Schematic Description of Node 2):
Uptrend: The Node 1 structure (S1-N1-Retracement) is established. Then, another upward move goes higher than N1 (N2) is formed. A downward retracement occurs (down to S2) which is greater than or equal to the previous retracement, but does not go below the initial S1. Indicated by a dashed line for confirmation, the price must pass the N2 peak.
Downtrend: The Node 1 structure (N1-S1-Retracement) is established. Then, another downward move goes lower than S1 (S2) is formed. An upward retracement occurs (up to N2) which is greater than or equal to the previous retracement, but does not go above the initial N1. Indicated by a dashed line for confirmation, the price must pass the S2 bottom.