A diagonal is a special type of wave that occurs primarily in the fifth wave position at times when the preceding move has gone “too far too fast,” as Elliott put it. A diagonal is a motive pattern, yet not an impulse, as it has one or two corrective characteristics. Diagonals substitute for impulses at specific locations in the wave structure. They are the only five-wave structures in the direction of the main trend within which wave four almost always moves into the price territory of (i.e., overlaps) wave one. (See Figure 1.)

Key Takeaway: When you spot an ending diagonal, be ready for a fast trend reversal.

For a complete description, please read Elliott Wave Principle: Key to Market Behavior by Robert Prechter and A.J. Frost.