Elliott Wave: DIAGONAL TRIANGLES (WEDGES)

A diagonal triangle is an impulsive pattern, yet not an impulse, as it has one or two corrective characteristics. Diagonal triangles substitute for impulses at specific locations in the wave structure. They are the only five-wave structures in the direction of the main trend within which wave four almost always moves into the price territory of (i.e., overlaps) wave one. On rare occasions, a diagonal triangle may end in a truncation, although in our experience, such truncations occur only by the slimmest of margins.

Ending Diagonal

An ending diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast," as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes (see next section), they appear only as the final "C" wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.

Ending diagonals take a wedge shape within two converging lines, with each subwave, including waves 1, 3 and 5, subdividing into a "three," which is otherwise a corrective wave phenomenon. The ending diagonal is illustrated in Figures 8 and 9 and shown in its typical position in larger impulse waves.

Leading Diagonal
When diagonal triangles occur in the fifth or C wave position, they take the 3-3-3-3-3 shape that Elliott described. However, it has recently come to light that a variation on this pattern occasionally appears in the first wave position of impulses and in the A wave position of zigzags. The characteristic overlapping of waves one and four and the convergence of boundary lines into a wedge shape remain as in the ending diagonal triangle. However, the subdivisions are different, tracing out a 5-3-5, or 5-3-5-3-5 pattern. The structure of this formation (see Figure 10) does fit the spirit of the Wave Principle in that the five-wave subdivisions in the direction of the larger trend communicate a "continuation" message as opposed to the "termination" implication of the three-wave subdivisions in the ending diagonal. This pattern must be noted because the analyst could mistake it for a far more common development, a series of first and second waves, as illustrated in Figure 5.

The main key to recognizing this pattern is the decided slowing of momentum in the fifth subwave relative to the third. By contrast, in developing first and second waves, phenomena such as short term speed of movement and breadth (i.e., the number of stocks or subindexes participating) often expands.