NetFlix, Diagonals and Required Zigzags

It's not often that one gets to study potential ending diagonals in some detail. For that reason, and that reason alone, the daily chart of Netflix is being posted below, and included is one level of detail.

NFLX - Daily - Potential Contracting Ending Diagonal

So, overall, this chart shows higher highs - currently in a wedge shape - and on a divergence of the Elliott Wave Oscillator. Yes, we don't know wave minute ((iii)) is done yet. But it looks 'close'. And certainly wave minute ((iii)) is currently shorter than minute ((i)) at this point in time, as is required in a contracting ending diagonal.

Further, starting over on the left, I have clearly indicated the five-wave non-overlapping sequences for each of the (a) and (c) waves within minute ((i)). And, the same for each of the (a) and (c) waves within minute ((iii)).

Let me be clear at the outset. Unless one can clearly find and describe these five-wave sub-waves within the potential zigzag waves of the diagonal, one's chances for calling a true diagonal would be substantially reduced.

But next, and very importantly, one must be able to establish - beyond any doubt - that waves minute ((ii)) which is seen on the chart, and minute ((iv)), which has not formed yet, are clear and distinct simple zigzags. This is required to prove the case of a diagonal.

For that reason one goes down from the daily chart - to the hourly or half-hourly chart - to see if that is fact or fiction. Now, just looking at this wave minute ((ii)) on the daily chart, above, one sees a big "hump" right in the middle of the wave - and because of degree labeling requirements - that is a big "clue" that the wave is a zigzag. But, does a zigzag count, in fact, hold up on closer inspection?

Here is the detail of the hourly chart which I have blown up as an "inset" for you, so you can count along as I have. If it seems like you would never have gotten this downward count correct to begin with, we'll explore why. See the boxed portion of the chart, below.

NLFX - Hourly - Zigzag Count

The waves immediately off the top are a true mess for most traders. Whenever I see that, I think in terms of (triangles? diagonals?). In fact, that is what we have, in spades. We have a leading contracting diagonal for the (a) wave - which counts correctly in every detail, followed by a zigzag (b) wave, followed by an impulsive (c) wave down to complete wave minute ((ii)).

The diagonal, zigzag, impulse pattern shows excellent alternation. In general, because of alternation, within a zigzag the (a) and (c) waves should not both be diagonals. If one is a diagonal, the other should be an impulse, and  that is precisely what we see.

But further, to complicate traders & wave-counters lives there are at least two triangles in this count. The leading diagonal (a) wave must also be comprised of zigzags. And that is exactly what we see. The LD's wave i, starts off as ((A)), triangle ((B)), and ((C)). And the remaining waves ii - v are clearly three-wave sequences too, in which wave iv is shorter than wave ii, and overlaps wave i.

Within wave (c), it is hard to miss the cascading waterfall wave for it's wave iii. It's wave ii is very short in terms of points, and time. And, it's wave iv makes up for that with a much larger but entirely valid running triangle which is "the structure before the last wave in the sequence". Once again, this is just excellent alternation between waves ii and wave iv!

So, again, we show - without breaking or bending any Elliott Wave rules - we wind up with a fully proven case for a zigzag downward. In fact, it is the alternation that gives us high confidence in the count. Some people do not understand alternation. Some people don't use it, and some people use it incorrectly.

Will you be one of the people who use it as a veritable weapon in your wave counting? I hope you will. And I hope you will enjoy the rest of your weekend.

TraderJoe
(P.S. - Just a reminder there was a post on Saturday, too, if you haven't seen it yet)