The leading diagonal triangle wave. The leading diagonal triangle, or wedge as many call it, is a narrowing price move composed of two converging trendlines occurring in a wave 1 position of impulses or wave A position of zigzags. The chart to the right shows the ideal example without any subwaves highlighted.

Notice that wave 4 overlaps wave 1, just as it does in the ending diagonal triangle pattern. However, the ending diagonal triangle has a 3-3-3-3-3 subwave structure, but the leading diagonal triangle shows a 5-3-5-3-5 pattern. The next chart makes this clear.

Frost and Prechter write,

"The structure of this formation fits the spirit of the Wave Principle in that the five-wave subdivisions of the actionary waves communicate a ’continuation’ message as opposed to the ’termination’ implication of the three-wave subdivisions in the actionary waves of the ending diagonal."

I have no idea what that means, but I couldn’t have said it better myself. They go on to write that Elliott did not discover this pattern, but Frost and Prechter believe it is valid.

About identification, they go on to write,

"The main key to recognizing this pattern is the decided slowing of price change in the fifth subwave relative to the third. By contrast, in developing first and second waves, short term speed typically increases, and breath (i.e., the number of stocks or subindexes participating) often expands."

Rules

The leading diagonal triangle has rules that govern its shape. They are listed here.

* The subwave action usually follows two converging trendlines.
* Subwave four often overlaps subwave 1.
* The subwave count is 5-3-5-3-5.
* The leading diagonal triangle usually occurs as part of wave one of impulses or wave A of zigzags.


The above is the quote from Bulkowski.
Does it clarify the issue? Probably not.
To me, probability of a leading diagonal is high. Risk is limited; once the last C wave down is finished. Reward is high.
Is it a PERFECT leading diagonal? Subwaves 1, 5 are not impulses, but can be construed as motive waves.