Leading Diagonal
A leading diagonal is a wedge-shaped pattern that appears only in the Wave 1 or Wave A position. It signals the very start of a new trend. Unlike a regular impulse, its waves overlap. Waves 1 and 4 share price territory, which is normally forbidden in impulses. The internal structure can be either 5-3-5-3-5 or 3-3-3-3-3. You spot it as a narrowing wedge with converging trendlines at the beginning of a move. Leading diagonals are relatively rare, so when you identify one, pay attention. They tell you the market is starting a new trend but struggling to gain traction initially. The breakout from a leading diagonal often produces a sharp Wave 2 retracement followed by a powerful Wave 3.
After a major low in crude oil at $60, price rallies in five overlapping waves to $68, forming a wedge shape. Wave 1 of the diagonal reaches $64, Wave 2 pulls back to $61.50, Wave 3 pushes to $66, Wave 4 drops to $63.50 (overlapping Wave 1 territory), and Wave 5 hits $68. The converging trendlines confirm the diagonal. You then expect a sharp Wave 2 retracement toward $63 to $64 before a powerful Wave 3 rally begins.