Wave E
Wave E is the fifth and final wave inside a triangle pattern. Triangles subdivide into five waves labeled A-B-C-D-E, all of which are corrective (three-wave) structures. Wave E is special because it signals that the triangle is about to end and a breakout is coming. One of the most useful characteristics of Wave E is the throw-under (or throw-over in ascending triangles). Wave E frequently falls short of the trendline connecting waves A and C. It does not quite reach the boundary. This premature reversal is actually a reliable signal that the triangle is complete. Some traders wait for Wave E to touch the A-C trendline and miss the trade entirely. Experienced wave traders recognize the pattern early and position before the breakout. Wave E is also notorious for trapping traders on the wrong side. The move into Wave E often looks like a breakout in the wrong direction, shaking out weak hands right before the real move begins. After Wave E completes, price typically breaks out violently in the direction of the larger trend.
Ethereum is forming a contracting triangle in Wave 4. Waves A through D have traced out converging trendlines between $3,200 and $2,800. Wave E begins dropping toward the lower trendline at $2,850. But instead of reaching $2,850, price reverses at $2,880, about 1% short of the trendline. This throw-under signals the triangle is complete. A trader enters long at $2,900 with a stop below $2,800 (below the triangle). Price breaks out to the upside and rallies $500 in Wave 5. The throw-under gave an early entry with tight risk.