Below is the current two-hourly chart of the Dow Jones Industrial Average, and a potential count of an expanding diagonal (or alternatively) triple zigzag.
|DJIA Cash Index - Two Hour Chart - Potential Diagonal|
First, it needs to be very clear that this is a potential pattern. To emphasize that point, I have shown only a dotted trend line above. Including the ((A))-((B))-((C)) pattern we have have uncovered today where the ((B)) wave is a triangle, there is some justification for looking for the expanding diagonal pattern, or its alternate cousin the expanding triple zigzag lower (shown in red below the waves).
The primary and only purpose of this chart is to show you how to define your risk of an incorrect count. We know in an expanding diagonal that wave iv may not travel above wave ii. That would invalidate an otherwise correct pattern to this point in time - which, in the cash market is composed entirely of zigzags.
Notice, too, in the cash market that sub-wave ((B)) of iii is just points shy of exceeding the length of ii, adhering to wave degree considerations.
So, this is how knowing the Elliott Wave patterns can help you objectively define your risk of an incorrect count. It is also a clear example of why there are alternate patterns in the market. Downward overlap on ((A)) downward, or trading below the recent ((B)) would be better confirmation of the pattern counting out correctly.
Have a great start to your weekend.