ANSWER:

The amount wave-2 is allowed to retrace of wave-1 depends on two, important questions. Is the larger impulsion Trending or Terminal and is wave-2 a monowave or does it subdivide into an a-b-c?

Let’s address each variable one-by-one. 

In TRENDING Impulsions (this is where waves-2 and 4 CANNOT share any of the same price territory)

1. If wave-2 is a monowave, it should NOT retrace more than 61.8% of wave-1

2. If wave-2 subdivides into an a-b-c, on rare occasions, wave-a might retrace more than 61.8% of wave-1, but wave-c (of wave-2) must conclude at 61.8% or less of wave-1.

In TERMINAL Impulsions (this is where waves-2 and 4 MUST share some of the same price territory)

1. If wave-2 is a monowave, it CAN retrace more than 61.8% of wave-1

2. If wave-2 subdivides into an a-b-c, BOTH waves-a and c (though not required) can conclude beyond a 61.8% retracement of wave-1. 

It is during Terminal patterns that wave-2 is allowed to retrace as much as 99% of wave-1, but never 100% or more.