The diamond top and bottom
pattern "<>" consists of a broadening pattern "<"
where the price range increases in height from left to right followed by a
triangle ">" where the price range shrinks in height from left to
right. A diamond top is distinguished by the price trend increasing before the
diamond formation; in contrast, a diamond bottom is distinguished by the price
trend decreasing before the diamond formation. A breakout move upward occurs
when price penetrates above the downward sloping resistance line (the top slope
"\" of the triangle ">").
Looking at the
chart EURJPY which rallied from the lower level of 117.05 and has tested the
level of 127.7 thereafter has entered in the range bounce trading. On higher
side it is forming the Diamond Pattern where as per the above explanation is
perfectly in the same line. It is just near the lower support trend line which
is coming at 125.20 and sustain closing below the same will give a confirmation
of the breakdown, as per the breakdown Bulkowski (2008) gives more precise
breakout targets. Formula and
calculation to calculate the pattern breakdown is as follow.
Diamond Top Downward Breakout
Price Target: Breakout Price - ((Highest Peak of Diamond
Pattern - Lowest Valley of Diamond Pattern) * 76%)
Diamond
Top Downward Breakout Price Target: 125.2-((127.7-123.5)*76%) = 122
immediate level
Considering100%
fall can bring to 121 where as 161.8% comes to 118 in medium term
Counter trend if the support of 125.2 holds and
price bounce back and cross the higher resistance level of 126.93 which is the
falling trend line. Sustain closing above 126.9 will give a confirmation of the
upside breakout and price will rise further in near term. As per the breakdown Bulkowski
(2008) gives more precise breakout targets.
Formula and calculation to calculate the pattern breakdown is as follow.
Diamond Top Upward Breakout Price
Target: Breakout Price + ((Highest Peak of Diamond
Pattern - Lowest Valley of Diamond Pattern) * 69%)
Diamond Top Upward Breakout Price
Target: 126.93 + ((127.7-123.5)*69%) = 129.8
