M & W Wave Patterns │ Arthur A. Merrill

In 1971, Robert A. Levy made the first attempt to systematically classify price patterns. He categorized five-point patterns, defined by price swings influenced by stock volatility, and tested their significance. Although he was unable to identify any substantial forecasting power, he introduced a valuable concept: the five-point categorization of time-price patterns.

» Pick any five consecutive turning points. If the first of the four swings is upward, 

the pattern forms an M. If the first swing is downward, the pattern is a W. «

Arthur A. Merrill, 1984.

 

This method remained dormant for a decade until Arthur A. Merrill revived it and published applicable results in the early 1980s: He employed the same five-point pattern approach, but instead of Levy's volatility filter, he used a rather large 8-percent swing filter in his research study. (Of course, since time and price are fractal, Merrill's patterns are too; they appear on every price swing scale across all timeframes.)

 

Merrill's 16 M and 16 W wave patterns, and their statistical occurrences: Are some of these patterns bullish? 

Are some bearish? When a certain pattern occurred in the past, what happened to prices after the pattern?

Merrill organized five-point patterns based on the sequential order of points from high to low, creating a structured taxonomy of "Ms" and "Ws". He identified 32 distinct patterns, grouping them into two categories: 16 resembling a capital M and 16 resembling a capital W. He then highlighted six subcategories, based on classical chart pattern names used by market technicians:

Uptrends                                            M15, M16, W14, W16
Downtrends                                      M1, M3, W1, W2
Triangle                                               M13, W4
Head and Shoulders                      W6, W7, W9, W11, W13, W15
Inverted Head and Shoulders    M2, M4, M6, M8, M10, M11
Broadening                                        M5, W12 

For example, an M1 is a strongly descending pattern, while the middle patterns, M8 and M9, are flat. An M16 is a strongly ascending pattern. Similarly, a W1 is a descending pattern, the middle Ws are flat, and a W16 is an ascending pattern.

 

So, what is the practical application and benefit of Merrill's weird-looking M & W Wave Patterns in trading? They can be used to identify support/resistance levels, determine areas of interest, anticipate market direction and reversals, project extensions, define entry and exit points, and manage risk. 

 

» There are only two ways a short-term high or low is broken. «

Larry Williams,  2000.

How? You may want to watch the following video, as well as review the references and recommendations provided below.

 

M & W Patterns: A Complete Guide to Market Structure, 

Change of Trend, Entries & Targets.

 

Reference:

Arthur A. Merrill (1984) - Behavior of Prices on Wall Street (2nd Ed.).

Arthur A. Merrill (1980) - M and W Wave Patterns.

Arthur A. Merrill (1977) - Filtered Waves - Basic Theory.

 

See also: 

Larry Williams (2000) - Swing Points as Trend Change Indication. 

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change.  

Andrey Emelyanov (2014) - Evolution and Mutation of Dynamic Five-Point Wave Patterns. 

Michael J. Huddleston (2022) - Trading Market Reversals. (video) 

Aksel Kibar (2024) - The 8 Most Common Chart Patterns & How to Trade Them.