FAQ: Sometimes on your charts there is overlap between waves one and four within wave 5. Doesn't that break a rule?
by Editorial Staff
Updated: March 28, 2015
In that case, wave 5 is an ending diagonal, as described in Elliott Wave Principle, page 37, and excerpted here:
A diagonal is a motive pattern yet not an impulse, as it has two corrective characteristics. As with an impulse, no reactionary subwave fully retraces the preceding actionary subwave, and the third subwave is never the shortest. However, a diagonal is the only five-wave structure in the direction of the main trend within which wave four almost always moves into the price territory of (i.e., overlaps) wave one and within which all the waves are "threes," producing an overall count of 3-3-3-3-3. ... Ending Diagonal An ending diagonal occurs primarily in the fifth wave position at times when the preceding move has gone "too far too fast,"as Elliott put it. A very small percentage of diagonals appear in the C-wave position of A-B-C formations. In double or triple threes (see next section), 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.
A contracting diagonal takes a wedge shape within two converging lines. This most common form for an ending diagonal is illustrated above and shown in its typical position within a larger impulse wave.