Diamond Top Formation
A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend. It is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond.
KEY TAKEAWAYS
1. A diamond top formation is a chart pattern that can occur at or near market tops and can signal a reversal of an uptrend.
2. A diamond top formation is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond.
3. Technicians suggest that to calculate the potential move, once the neckline of a diamond formation is broken, the trader should calculate the distance between the highest and lowest point in the diamond formation and add it to the breakout point.
Key Characteristics
Most diamond top formations will exhibit the following characteristics:
1. The security's price should be trending upward.
2. Price action should then start resembling a broadening pattern, where the peaks are higher and the troughs are lower, at the onset.
3. Subsequently, the price action changes to where the peaks are lower and the troughs are higher.
4. Connecting the peaks and troughs will form a diamond, usually tilted to one side.
A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend. It is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond.
KEY TAKEAWAYS
1. A diamond top formation is a chart pattern that can occur at or near market tops and can signal a reversal of an uptrend.
2. A diamond top formation is so named because the trendlines connecting the peaks and troughs carved out by the security's price action form the shape of a diamond.
3. Technicians suggest that to calculate the potential move, once the neckline of a diamond formation is broken, the trader should calculate the distance between the highest and lowest point in the diamond formation and add it to the breakout point.
Key Characteristics
Most diamond top formations will exhibit the following characteristics:
1. The security's price should be trending upward.
2. Price action should then start resembling a broadening pattern, where the peaks are higher and the troughs are lower, at the onset.
3. Subsequently, the price action changes to where the peaks are lower and the troughs are higher.
4. Connecting the peaks and troughs will form a diamond, usually tilted to one side.