Diamond Top
Requires ConfirmationA rare bearish reversal pattern combining a broadening formation and a symmetrical triangle back to back: swings widen into a rhombus shape, then narrow toward an apex before breaking down.
Candlestick chart rising into a widening series of swings (each high higher and each low lower than the last), then narrowing into a converging series of swings toward an apex, then breaking down decisively below the lower boundary.
Sample data — illustrative only, generated to demonstrate this pattern's shape. Not a real security.
Identification Criteria
- Forms after an uptrend, never in the middle of a range.
- The first half shows widening swings — each new high is higher and each new low is lower than the one before, exactly like a broadening formation.
- The second half shows narrowing swings that converge back toward an apex, exactly like a symmetrical triangle.
- Volume classically expands during the widening phase and contracts during the narrowing phase.
- Because it requires two distinct phases with multiple touch points on each, the pattern takes longer to confirm than most reversal shapes.
Formation Logic
The widening phase reflects rising disagreement between buyers and sellers near a market top, with each swing overshooting the last. The narrowing phase that follows shows that disagreement resolving into a tighter range as one side quietly loses conviction — the diamond shape is the visual signature of volatility expanding and then compressing before the trend reverses.
Breakout / Confirmation Rule
Confirmation requires a decisive close below the lower boundary of the narrowing (right) half of the pattern, ideally on rising volume. Because the widening phase alone is indistinguishable from an ordinary broadening top, do not treat the pattern as a diamond until the narrowing phase is clearly visible.
Measured-Move Price Target
A commonly used, purely illustrative technique: measure the tallest vertical distance within the diamond (from its widest high to its widest low), then project that distance below the breakout point.
Common Pitfalls
- Genuinely rare — many "diamond-looking" shapes are just a broadening formation that never develops a narrowing second half.
- Requires many touch points across a long formation period, which tempts traders to call the pattern too early.
- Easy to confuse with a complex head-and-shoulders variant once the narrowing phase begins.