A Wolfe Wave is a chart pattern composed of five wave patterns in price that imply an underlying equilibrium price. Investors who use this system time their trades based upon the resistance and support lines indicated by the pattern.

To be properly identified as a Wolfe Wave a series of criteria must be met, such as wave cycles each being similar and distinct price action in the third and fourth waves.

For a true Wolfe Wave, the fifth wave instance in the pattern will be followed by a breakout in price.