Diamond top pattern forms on chart where stock trade in uptrend.
This chart Pattern is a short term bullish continuous pattern if breakout happen upwards.
Diamond chart pattern has 10% failure rate after breakout.
Average rise in stock price after breakout 27% in bull market and 33% in bear market.
Average decline after trend ends is -29% in bull market and -34% in bear market
69% of time price meet the target after the breakout in bull market and 74% in bear market.
During the formation of pattern as shown in picture left shoulder price forms higher high and lower lows which leads to the formation of head as show in picture after the formation of head stock price break down the previous low and not able to cross previous high which lead to the formation of right shoulder.
Stock price during the formation of this pattern first forms higher high lower lows and than lower high and higher lows
Trend line connecting these higher high and lower lows forms the diamond patters.
Before breakout or breakdown volume start increasing.
If stock price break down the trend line of diamond formation with high volume leads to the breakdown in stock.
If stock price breakout the trend line with 50% more volume it leads to breakout.
Time duration of stock price to reach the target price is 6 weeks after breakout of breakdown
Total days for formation of this patter varies form 46 to 56 days.
Pattern with wide formation performs better than narrow one.
Diamond pattern with falling volume performs better in bear market.
To set the target calculate the price difference between top of the pattern and bottom of the pattern and divide it by 2 and add the number when breakout happens.
After breakout calculate the risk and reward place your stop loss below the support level of stock.
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