Diamond Top / Diamond Reversal Top
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A diamond-shaped pattern at highs where price fluctuations first widen (broadening) then narrow (symmetrical triangle). After swings in highs and lows expand and then contract, a downward break below the neckline confirms a reversal into a downtrend. While relatively rare, it has high reliability when it appears.
Enter short when price clearly breaks below the diamond's lower trendline on a closing basis. A breakout accompanied by volume increase is more reliable.
Project the distance from the diamond's highest high to lowest low downward from the breakout point. For example: if the highest is 1080 and lowest is 880, the range is 200; from a breakout at 860, the target is 660.
Place a stop-loss slightly above the most recent high within the diamond (the high from the contracting phase). If price breaks above the upper edge, consider the pattern invalid.
Volume tends to increase during the broadening phase and decrease during the contracting phase. A volume surge when the neckline breaks enhances reliability.