Good evening traders!
NZDJPY is looking interesting if we bring up the fact, that price can be trading at the end of a three-wave decline from January highs. We see a fully unfolded five wave move within wave A), then a nice sharp correcitve rally in wave B), and now a five wave, overlapping decline within wave C), with a possible low at the 77.63 level. A sharp rally that followed from the new low can be the first evidence of a trend reversal in minimum three waves. On that note, the overlapping price movement within wave C) is known as a Elliott wave ending diagonal, that can once fully unfolded push price strongly into the opposite direction, and towards the start of the pattern, in our case this could be to 81.30 level.
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An ending diagonal is a special type of pattern that occurs 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, 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.
- structure is 3-3-3-3-3
- a wedge shape within two converging lines
- wave 4 must trade into a territory of a wave 1
- appears primarily in the fifth wave position, in the C wave position of A-B-C and in double or triple threes as the final C wave
Ending diagonal pattern:
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