DIAMOND REVERSAL PATTERN
Diamond tops typically form at the end of an uptrend which makes them a powerful signal for a reversal. Usually, these patterns will look similar to an off-center head and shoulders pattern or a flattened double top pattern.
Traders identifying a potential diamond top will seek to draw trendlines around the pattern which form a diamond shape. The pattern must continue trading within the trendline boundaries to be classified as a diamond top. If the price action remains within the boundaries, the trendlines can provide isolated resistance and support levels that can help a trader to trade into the reversal.
Technical traders watch for patterns forming at a security price’s resistance trendline. Oftentimes, the resistance trendline will serve as a reversal point for the security’s price. However, it can also be common for the price to move through the resistance trendline and continue pushing higher.
Diamond top reversal patterns are one of several trend reversal patterns that can help a trader determine a security’s price momentum at its resistance level. Generally, most technical traders will seek to identify strong technical patterns such as a diamond top reversal at a security’s resistance level before betting on the security’s price movement. If a diamond top reversal is detected, then a trader will likely sell, or short sell, to profit from a new downtrend formation.
Traders identifying a potential diamond top will seek to draw trendlines around the pattern which form a diamond shape. The pattern must continue trading within the trendline boundaries to be classified as a diamond top. If the price action remains within the boundaries, the trendlines can provide isolated resistance and support levels that can help a trader to trade into the reversal.
Technical traders watch for patterns forming at a security price’s resistance trendline. Oftentimes, the resistance trendline will serve as a reversal point for the security’s price. However, it can also be common for the price to move through the resistance trendline and continue pushing higher.
Diamond top reversal patterns are one of several trend reversal patterns that can help a trader determine a security’s price momentum at its resistance level. Generally, most technical traders will seek to identify strong technical patterns such as a diamond top reversal at a security’s resistance level before betting on the security’s price movement. If a diamond top reversal is detected, then a trader will likely sell, or short sell, to profit from a new downtrend formation.
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