Corrections and diagonals
Lesson 21 of 23 in the course “Technical Analysis”. Free, with animations and a quiz.
The zigzag
Corrections are harder than impulses, and even Prechter admits they’re hard to label in advance. The simplest is the 5-3-5 zigzag. Wave A is a sharp move against the trend in five small waves. B is a short three-wave bounce. C is another five-wave move, often about equal to A. A zigzag is a deep, sharp correction, typical of wave 2.
The flat
A 3-3-5 flat is sideways. Wave B returns almost to the start of wave A, and C ends near the end of A. Such a correction says the trend is strong: sellers couldn’t even push price back deeply. It often shows up in wave 4, especially if wave 2 was a sharp zigzag.
The triangle
An Elliott triangle is five waves A-B-C-D-E, each made of three, with converging lines. It shows up in wave 4 or wave B, but almost never in wave 2. After a triangle comes the final move with the trend: if the triangle is wave 4, wave 5 is next. It’s the same pattern from the continuation lesson, just with labels.
The diagonal: the exception to rule 3
A diagonal is a wedge-shaped impulse. Five waves, converging lines, and wave 4 overlaps wave 1: the only place that’s allowed. An ending diagonal appears in wave 5 or C and says the move is exhausted: a sharp reversal often follows. Now in the trainer you’ll find the start of wave 1, label a zigzag and tell an impulse from a correction.
Check yourself
- What’s the structure of a zigzag?
Correct answer: 5-3-5. A zigzag: A in five, B in three, C in five. 3-3-5 is a flat, 3-3-3-3-3 is a triangle. - In which wave does a triangle almost never appear?
Correct answer: In wave 2. A triangle comes before the final move, so it shows up in wave 4 or B, but almost never in wave 2. - Where can wave 4 overlap wave 1’s territory?
Correct answer: Only in a diagonal. A diagonal is a wedge-shaped impulse, the only exception to rule 3. In a normal impulse the overlap is forbidden.
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