Triangle Pattern Correction : Elliott Wave

A triangle appears to reflect a balance of forces, causing a sideways movement that is usually associated with decreasing volume and volatility. The triangle pattern contains five overlapping waves that subdivide 3-3-3-3-3 and are labeled A-B-C-D-E. A triangle is delineated by connecting the termination points of waves A and C, and B and D. Wave E can undershoot or overshoot the A-C line, and in fact, our experience tells us that it happens more often than not.

Types of Triangles

There are three varieties of triangles: contracting, barrier and expanding, as illustrated in Figure 1. Elliott contended that the horizontal line of a barrier triangle could occur on either side of the triangle, but such is not the case; it always occurs on the side that the next wave will exceed. Elliott’s terms, “ascending” and “descending,” are nevertheless useful shorthand in communicating whether the barrier triangle occurs in a bull or bear market, respectively.

Figure 1 depicts contracting and barrier triangles as taking place entirely within the area of preceding price action, which may be termed a regular triangle. Yet, it is extremely common for wave B of a contracting triangle to exceed the start of wave A in what may be termed a running triangle, as shown in Figure 2. Despite their sideways appearance, all triangles, including running triangles, effect a net retracement of the preceding wave at wave E’s end.