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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Ending Diagonal Triangle

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Industrials (^DJI):
Transports (^DJT):
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Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 10/30/2014
17,195 221.11 1.3%
8,631 -83.83 -1.0%
596 12.24 2.1%
4,566 16.91 0.4%
1,995 12.35 0.6%
YTD
3.7%
16.6%
21.6%
9.3%
7.9%
Tom's Targets    Overview: 10/30/2014
17,500 or 16,700 by 11/15/2014
8,850 or 8,200 by 11/15/2014
600 or 560 by 11/15/2014
4,600 or 4,200 by 11/15/2014
2,000 or 1,900 by 11/15/2014

Written and copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved.

This page describes the ending diagonal triangle of the Elliott wave principle, how price moves not in a straight line but in a series of rises and retracements.

 

The ending diagonal triangle wave. The ending diagonal triangle, or wedge as many call it, is a narrowing price move composed of two converging trendlines highlighting a wave 5 (many times) extension pattern. The chart to the right shows the ideal example. The ending diagonal is a special type of motive wave that occurs primarily in the wave 5 position when price has moved too far and too fast. I like to think of it as a rising or falling consolidation. Some ending diagonal triangles appear in the C wave of an ABC correction, but that configuration is rare. In all cases, the ending diagonal terminates the move of larger patterns. Diagonal triangles substitute for impulse waves.

The ending diagonal triangle shown to the right is bearish because price usually breaks out downward from the pattern with price often retracing back to at least the start of the triangle.

The blue inset in the figure to the upper right shows what is called a throw-over. Throw-overs occur when price breaks out of the pattern on the side connecting the end points of sub waves 1 and 3, quickly reverses, and then moves back into the pattern.

The ending diagonal triangle in a bear market.

Each subwave of the ending diagonal triangle divides into a three, so the subwave count for the triangle pattern is 3-3-3-3-3. The picture above right (bull market) and right (bear market), shows the typical position of the triangle in an impulse (motive) wave. The two solid blue squares in the above right chart highlight the overlap of subwave 4 with subwave 1. The ending diagonal triangle is the only five wave pattern moving in the direction of the main trend that frequently, but not always, shows such an overlap.

The chart to the right shows the ending diagonal triangle in a bear market. Notice that the waves within the triangle subdivide into 3 subwaves each. This one also shows subwave 4 overlapping subwave 1. This pattern is bullish when price breaks out upward from the top trendline. Price often rises back to at least the start of the triangle.

 

Ending Diagonal Triangle Rules

The ending diagonal triangle has rules that govern its shape. They are listed here.

  • The subwave action usually follows two converging trendlines.
  • Subwave 4 often overlaps subwave 1.
  • The subwave count is 3-3-3-3-3.
  • A throw-over occurs when price pierces the trendline connecting the ends of subwaves 1 and 3.
  • The ending diagonal triangle usually occurs as part of a fifth wave extension.

-- Thomas Bulkowski

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Copyright © 2008-2013 by Thomas N. Bulkowski. All rights reserved. Bumper sticker: If you can read this, I can hit my brakes and sue you.