Elliott Waves - How to Identify Ending Diagonal?

2022年5月16日

Why is it critical to be able to identify Ending Diagonal waves - because normally their completion is followed by the reversal of trend and in some cases with explosive price movements.
Above are the general rules for all the internal waves and for different variations of the pattern - Expanding and Contracting Ending Diagonals.

Why is Ending Diagonal forming instead of Impulse

• When in wave 5 - usually it occurs at the end of a growth cycle like we are observing now when the risks of investment (in case of equities) are increasing, and energy of bulls is slowly getting overwhelmed by the strength of bears, and a rapid reversal happens with some trigger point - Covid in 2020
  
• When in wave C of zig-zag - similar but in reverse, the energy of bears is weakening when forming a correction and bulls are taking over and a new growth cycle begins
  

It is important to note though that with great potential gains for investors, Ending Diagonal can be confused in some cases with complex corrections so traders need to be careful and considering only those cases where there is a very clear structure of waves.

Here are few examples from the real equities to see the different types of this extremely important wave structure.

Booking Holdings - an Expanding Ending Diagonal has been forming since the crash of the great financial crisis and with the current poor fundamentals the upcoming correction may be very deep

Tesla - just recently a lengthy Running Flat correction has completed with an Ending Diagonal in wave C (although it is still risky to assume this scenario given fundamental risks)

Amazon - the historic high in July 2021 was completed by an Ending Diagonal and notice how deeply it has corrected since then

And here are few examples where an Ending Diagonal is potentially developing:

Berkshire Hathaway - waves 1 to 4 have been formed and we are awaiting the final zig-zag of wave 5

AMD - after forming historic high the price has been correcting with ABC pattern and potential Ending Diagonal in wave C

HP - waves 1 to 4 of a global impulse have been formed and it is noticeable how choppy is the movement in the final wave 5 which is likely to be an Ending Diagonal

MA - similar situation as in HP

Thank you for reading my post.
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