Below is a slider quiz to test your ability to identify diamond bottoms and trade them. Captions appear below the pictures in red for guidance, so be sure to scroll down far enough to read them.
1 / 8
This is one of the prettiest diamond bottoms I've seen. Price forms a broadening pattern in the first half followed by a narrowing one in the second half. Volume trends
downward 67% of the time (A). Notice that price touches the trendlines on each side several times, but that's rare. Rare, too, is the diamond shape. You'll often see the top pushed to one side
or the other. The downward price trend leading to the start of this diamond makes it a bottom and not a top. Ignore the brief drop (B) a week or so before the pattern begins.
2 / 8
Find as many diamond bottoms as you can. For help, click here.
3 / 8
You should not have had too much trouble finding this one. It's shaped well, too.
The diamond bottom is at C. Yes, it looks like an elephant stepped on it, but that's okay. Another diamond is in green, but it's a diamond top and not a bottom.
The triple top is at DEF. The double top is at GH. Notice that the launch price
is at A and the return trip sees price dropped back to B, which is just above A. You'll see that type of behavior often enough (and I think I've remarked about it in these quizzes before).
6 / 8
Where's the diamond bottom in this picture? Can you find more than one? And find a symmetrical triangle, too.
7 / 8
The diamond is the, well, diamond shape at A. The other red lines highlight the symmetrical triangle. Here's the trading question. The breakout is at A and it's upward.
But where will price finish moving? Higher to 78, 80 or 85, or will it throwback to drop below the pattern and fall to 70, 65, or 61? Make your prediction now.
8 / 8
The stock continued higher to 78, so that was the correct guess. After that, price dropped more than 20%, meaning 78 was the 'ultimate high' (the best you could make
if trading it perfectly). Notice that this (the AB move) is similar to the launch price scenario of chart 5. In this case, the launch price is A and the stock climbs to B before reversing
with a reversal pattern nesting comfortably in between those two peaks.
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