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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Chart Patterns: After the Buy
Getting Started in Chart Patterns, Second Edition book.
Trading Basics: Evolution of a Trader book.
Fundamental Analysis and Position Trading: Evolution of a Trader book.
Swing and Day Trading: Evolution of a Trader book.
Visual Guide to Chart Patterns book.
Encyclopedia of Candlestick Charts book.
Encyclopedia of Chart Patterns 2nd Edition book.
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Bulkowski's Diamond Tops

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 08/29/2016
18,503 107.59 0.6%
7,860 35.76 0.5%
672 5.23 0.8%
5,232 13.41 0.3%
2,180 11.34 0.5%
YTD
6.2%
4.7%
16.4%
4.5%
6.7%
Tom's Targets    Overview: 08/12/2016
19,000 or 18,000 by 09/01/2016
8,275 or 7,500 by 09/01/2016
710 or 680 by 09/01/2016
5,300 or 5,000 by 09/01/2016
2,225 or 2,125 by 09/01/2016

Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 196 to 212.

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Diamond tops with upward breakouts in a bull market rank near the bottom for performance. Like diamonds bottoms, the top variety (with downward breakouts) show a fast decline post breakout if a quick rise lead to the diamond reversal. The crash site (downtrend end) is often near the price level of the launch site (uptrend start).

 

Diamond top chart pattern

Diamond Top

Score your chart pattern for
performance by clicking here

Important Bull Market Results for Diamond Tops

Overall performance rank for up/down breakouts (1 is best): 21 out of 23; 7 out of 21
Break even failure rate for up/down breakouts: 10%; 6%
Average rise/decline: 27%; 21%
Throwback/pullback rate: 59%; 57%
Percentage meeting price target for up/down breakouts: 69%; 76%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Diamond Top Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the pattern.
ShapeLooks like a diamond, but one usually tilted to the side.
TrendlinesPrices form higher peaks and lower valleys (a broadening pattern) in the first part of the pattern, then price action narrows with lower peaks and higher valleys. Trendlines connect the peaks and valleys for a diamond shape.
TouchesPrices will touch each trendline once or twice. Don't worry if your lines cross some of the price outliers.
Volume trendDownward trend 67% of the time.
BreakoutDownward 69% of the time.
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Diamond Top Trading Tips

Consult the associated figure on the right.

Trading TacticExplanation
Measure ruleSee the measure rule figure to the right. Compute the height from the highest peak (A) to the lowest valley (B) in the pattern and then multiply it by the above “percentage meeting price target.” Add it (upward breakouts, point A) or subtract it (downward breakouts, point B) from the breakout price to get the price target (C).
Price trendSee the price trend figure to the right. If price makes a quick, nearly vertical rise (A) leading to the diamond and the breakout is downward, expect price to drop back to the price at which it started (B) the rise. Also, price must have something to reverse. Diamonds with short-term (less than three months) price trends leading to the diamond perform best post breakout.
Half staffSee the half staff figure to the right. If the diamond acts as a continuation pattern, meaning that price exits (C to D) in the same direction as it entered the pattern (A to B), then the diamond can act as a half-staff pattern (half the move is still ahead). The move after the breakout (CD) will often fall short, so look for overhead resistance where price might stall.
Price velocityHigh velocity moves after the pattern often follow high velocity moves leading to the pattern.
Yearly middleFor best performance, diamonds with breakouts in the middle third of the yearly price range perform best, but samples are few, so don't depend on this one.
Volume trendA rising volume trend results in the best post breakout performance.
Throwbacks and pullbacksThrowbacks and pullbacks hurt post breakout performance.

Diamond top chart pattern measure rule

The Measure Rule

Diamond top chart pattern prince trend

Price Trend

Diamond top chart pattern half staff measure

Half Staff

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Diamond Top Example

Diamond top chart pattern example

The above figure shows an example of a diamond top chart pattern. Price begins the rise at point A and then forms the diamond top. The breakout from this diamond top is downward but it does not last long. Price pulls back and busts the diamond when price closes above the top of the diamond top chart pattern. The rise is also short and price plunges, stopping at B, near the launch price of A.

-- Thomas Bulkowski

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Other Diamond Top Examples

See Also

Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Madness takes its toll. Please have exact change.