Imagine you’re a financial trader standing at the “bus stop” of near-term opportunity for a specific market (i.e., the “bus.”). You don’t have a schedule handy so you ask the 3 other people at the stop for information on the arriving bus’s route. Here’s what they say:

  • Fundamental analyst: “The next bus might be headed north IF the water main leak in that direction has been repaired, OR the flock of geese standing in the street has been removed. Then again, it could still head north even if those external factors don’t get resolved. Really, we won’t know where the bus is going until after it leaves. “
  • Technical analyst of traditional indicators: “The low RSI reading indicates that the bus is headed south, but I can’t tell you at what point it’s going to stop.”
  • Elliott wave analyst: “The rules and guidelines pertaining to the specific Elliott wave pattern on said bus indicate that it should be stopping at the corner of “X” and “Y” street, then making a sharp turn north.”
Which analyst would you let map your trip?
Speaking of mapping out future market action, in the July 12 Elliott Wave Junctures video lesson, EWI‘s senior analyst Jeffrey Kennedy reveals in 5 minutes what 20-plus years of professional experience has taught him; that is:
When it comes to signaling the end of the larger price trend AND beginning of a meaningful new move in the other direction, 1 Elliott wave pattern rises to the top: the ending diagonal.
Minute 1 of Jeffrey’s July 12 Elliott Wave Junctures video lists the specific badges of an ending diagonal pattern:
  • Has a distinct rising or falling wedge shape
  • 5 overlapping waves
  • Each of the 5 waves subdivides into 3 smaller waves labeled a-b-c
  • Usually occurs in the wave 5 position of impulses
For example, here’s a “falling wedge” ending diagonal in a chart of Union Pacific Corp. stock (UNP):
And now, for the really exciting part: Whenever ending diagonals are complete, they tend to introduce very swift, sharp, volatile reversals. As you can see in the chart above, when the ending diagonal was done in UNP, price reversed and rose sharply.
That’s why, if you see this pattern on a market’s price chart, you should be very happy indeed!
In the July 12 Elliott Wave Junctures video, Jeffrey shows you 3 real-world examples of ending diagonals in 3 markets. One of them is Google (GOOG) stock chart dating back well into 2011 to current times — with a huge, multi-month ending diagonal showing! In Jeffrey’s own words:
Keep your eye on Google. If the larger pattern identification is indeed correct, we probably have… a very sharp [move ahead.]”
By Nico Isaac
Wed, 18 Jul 2012 15:30:00 ET
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