Leading Diagonals: Confusing Traders since 1880sSInce mid Nov 2025, traders have found it almost impossible to predict the pattern in Bitcoin, Coreweave, NBIS kind of charts and rightly so, because leadign diagonal has entered the room.
So what is a leading diagonal . In Elliot wave theory, a leading diagonal appears at the start of a new trend. In short,
- It looks like a wedge with overlapping waves
- Forms when a trend is trying to begin but lacks full conviction
- Indicates early positioning before broader participation
- Is usually followed by a strong, decisive move once belief catches up
Think of it as the market testing new direction, before committing to it.
How the market feels when a leading diagonal is forming:
Conflicted rather than confident. Price is moving in the direction of the new trend, but the underlying conviction isn’t fully there yet.
1. Early believers vs. skeptics
A new trend is trying to start, but most participants are still anchored to the prior trend. Early buyers (or sellers) step in, yet they’re repeatedly met with profit-taking and countertrend pressure.
2. Momentum exists, but it’s uneven
You’ll often see overlapping waves, shallow follow-through, and corrective pullbacks that feel premature. This reflects commitment without consensus.
3. Volatility stays elevated
Because conviction is low, price tends to swing more than it should in a healthy impulse. Stops get hunted, and false breaks are common.
4. Participation is selective
Smart money is probing. Retail is hesitant. Volume often fails to expand cleanly because positioning is still being tested rather than fully deployed.
5. Pressure quietly builds
Each push forward that doesn’t fully fail chips away at skepticism. By the time the diagonal completes, positioning is often lopsided, setting up the sharp move that usually follows.
In short ,
A leading diagonal feels like a market arguing with itself. Direction is emerging, but belief hasn’t caught up yet. That internal debate is exactly why the structure looks messy and why the resolution afterward tends to be decisive.
So how to identify a leading diagonal technically:
1. Wave count: Five waves (1–2–3–4–5), but waves overlap (Wave 4 overlaps Wave 1).
2. Shape : Price compresses into a wedge (contracting or expanding).
3. Momentum : Progress is directional but uneven, with shallow follow-through.
4. Trendline s: Upper and lower boundaries converge or diverge, not parallel like an impulse.
5. Confirmation : The move after the diagonal is typically sharp and fast, validating the pattern.
6. Usually, : Wave a or 1 is longest and wave c or (iii) cannot be shortest amount the up waves
In essence, if price is advancing, overlapping, and compressing early in a move,while still making progress, you’re likely looking at a leading diagonal.
What do indicators show when a leading diagonal is forming ?
RSI
-Often shows weaker momentum on Wave 3 than expected.
- May produce early divergence even though price is still advancing.
- Tends to stay capped (bullish case) instead of trending strongly.
MACD
- Momentum expands initially, then fails to accelerate.
- Histogram peaks early and flattens as price continues.
- Signal line crosses are frequent, reflecting overlap and indecision.
How to trade a leading diagonal ?
- Leading diagonals overlap and retrace deeply. If you size or manage it like a clean Wave 1, you’ll get chopped.
- The safest entry is from Wave 4 → Wave 5, Stops usually go beyond the Wave b or wedge invalidation level.
- Best approach WAIT: The highest-quality trade often comes after the diagonal finishes.
- What to wait for: Clean break of the wedge, Momentum expansion (RSI/MACD confirmation), Strong follow-through in the next impulse
- Breakouts inside the diagonal frequently fail so avoid chasing internal breakouts. If price breaks a boundary but momentum and volume don’t expand, assume it’s noise.
A leading diagonal is the market warming up. The real opportunity comes once it’s done arguing.
