Diametric patterns are corrective patterns, and once completed, the price tends to move strongly in the other direction ( similar to triangles). Diametric patterns, on the other hand, have seven legs and are incredibly tough to trade.
The Diametric pattern in NEowave is a pretty popular pattern that we see on charts quite frequently.
Glenn Neely created the Neo Wave idea, which is a more sophisticated version of the Elliott Wave.
Neely uncovered a few new patterns, and these new patterns have started appearing more often in the equities markets.
The diametric pattern is a pretty popular pattern that we see on charts quite frequently.
A Diametric is a seven-legged correction pattern that is represented by the letters A-B-C-D-E-F-G.
Each of these legs is corrective and not impulsive in its own right.
Diametric comes in two forms: Diamond-Shaped or Bow-Tie structure.
In layman’s words, it can be a contracting triangle pattern linking an expanding triangle or an expanding triangle pattern connecting a contracting triangle pattern. (Instead of a-b-c – X – a-b-c, Neely started with the alphabet, labeling it a-b-c-d-e-f-g. )
Another distinguishing feature of a diametric pattern is that wave E tends to be equal to wave C in terms of price and/or duration, wave F tends to be equal to wave B, and wave G tends to be equal to wave A.
Take note of the following:
1. Diametric patterns are classified into two types: A) bow-shaped (contracting initially and expanding later) and B) diamond-shaped (expanding first and contracting later).
2. Once the pattern is completed, the price normally moves in the other way fairly quickly.
3. Price activity that occurs following the conclusion of a diamond type is generally faster than that of a bow type (thus diamond types are more bullish/bearish).
4. The ‘G’ leg might cross or end below the ‘E’ leg in the Bow type diametric pattern. ‘G failure’ occurs when the G leg terminates below the E leg or fails to cross the high of the E leg.
5. If the G leg fails, the price action that follows will be quite sharp. It might be so acute at times that traders are unable to enter a trading position.
6. Both of these patterns can alternatively be interpreted as ‘double corrective,’ i.e. ABC-X-ABC ( however I prefer to read them as one).
7. Diametrics fundamentally signify market confusion, which is explained by overlapping price movements, and after the confusion is addressed, i.e. the diametric is complete, a clear trend follows.
8. And, like with all patterns, diametric patterns may be observed in both bull and down markets. The above illustration is of a bear market ( since prices are expected to move down once G leg is complete).
9. Most legs’ time action might be comparable (i.e. all or most legs might last for same number of days).