Elliot Waves Complete Guide | Chapter 2.2 - "Ending Diagonal"

Hello Traders. Here we will examine the next pattern for diagonal patterns.

Chapter 2 - Motive Waves:
2.1 Impulse, Leading Diagonal
2.2 Ending Diagonal , Truncation
2.3 Extension, Fifth Wave Extensions

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In conventional technical analysis, they call it “wedge”. In Elliott Wave analysis we call it “ending diagonal”. Both terms imply the same thing – reversal ahead, but since we work with the Wave Principle, we will refer to it as an ending diagonal.

The ending diagonal is a special type of wave that occurs in wave 5 of an impulse, or wave C of a correction. This wave often occurs when the preceding move of the trend has gone too far, too fast, and has run out of steam. An ending diagonal pattern is a type of pattern that can occur at the completion of a strong move. It reflects a “calming” of the market sentiment such that price still moves generally in the direction of the larger move, but not strongly enough to produce an impulsive wave. Ending diagonals consist of five waves, labeled 1-2-3-4-5, where each wave subdivides into three legs. Waves 1 and 4 overlaps in price, while wave 3 can not be the shortest amongst waves 1, 3, and 5.

The reason why they are so interesting is that they are indicating a reversal, usually a strong one. That said, after a completed ending diagonal, prices are expected to go back to the level, where the pattern had started.

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Elliot Waves Complete Guide | Chapter 1 - "The Overall Cycle"

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Elliot Waves Complete Guide | Chapter 2.1 - "Motive Waves"