As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019
As of 10/11/2019
  Indus: 26,817 +319.92 +1.2%  
  Trans: 10,292 +224.65 +2.2%  
  Utils: 867 -5.54 -0.6%  
  Nasdaq: 8,057 +106.26 +1.3%  
  S&P 500: 2,970 +32.14 +1.1%  
YTD
 +15.0%  
 +12.2%  
 +21.6%  
 +21.4%  
 +18.5%  
  Targets    Overview: 09/30/2019  
  Up arrow27,600 or 25,600 by 10/15/2019
  Up arrow11,100 or 9,700 by 10/15/2019
  Up arrow900 or 850 by 10/15/2019
  Up arrow8,300 or 7,700 by 10/15/2019
  Down arrow2,825 or 3,050 by 10/15/2019

Bulkowski's Diamond Bottoms

 

For more information on this pattern, read Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns book., pictured on the right.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

Statistics updated on 10/15/2018. Rank updated on 7/26/19.

Let me be clear about this: I don't like diamonds. They are as tough to spot as night crawlers in the grass on a summer night. Most often, you'll find diamond bottoms in a bull market with an upward breakout. A redeeming quality of diamond bottoms is that a quick rise sometimes follows a quick decline.

Important Results
Identification Guidelines
Trading Tips
Example
Other Examples
See Also

 

Diamond bottom chart pattern

Diamond Bottom

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Diamond Bottoms: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 26 out of 56/19 out of 53
Break even failure rate for up/down breakouts: 10%; 15%
Average rise/decline: 41%; 19%
Throwback/pullback rate: 53%; 67%
Percentage meeting price target for up/down breakouts: 76%; 54%

The above numbers are based on 447 perfect trades. See the glossary for definitions.

Diamond Bottoms: Identification Guidelines

CharacteristicDiscussion
Price trendDownward leading to the pattern.
ShapeLooks like a diamond, but usually one 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 outline many of the peaks and valleys, forming 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.
BreakoutUpward 72% of the time, when price closes outside one of the trendline boundaries.

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Diamond Bottoms: Trading Tips

Consult the associated figure on the right.

Trading TacticExplanation

Diamond bottom chart pattern measure rule

The Measure Rule

Diamond bottom chart pattern prince trend

Price Trend

Diamond bottom chart pattern half staff measure

Half Staff

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) or subtract it (downward breakouts) from the breakout price (blue line) to get the price target (C).
Price trendSee the price trend figure to the right. If price makes a quick, nearly vertical drop (A) leading to the diamond and the breakout is upward, expect price to recover back to the price at which it started the plunge (B). Also, price must have something to reverse. Diamonds with short-term (less than three months) or intermediate-term (three to six months) price trends leading to the diamond perform best, depending on market condition and breakout direction.
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 or underlying support where price might stall.
Price velocityHigh velocity moves after the pattern often follow high velocity moves leading to the pattern.
Yearly lowFor best performance, diamonds with breakouts within a third of the yearly low perform best.
Volume trendA rising volume trend results in the best post breakout performance.
Throwbacks and pullbacksThrowbacks and pullbacks hurt post breakout performance.

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Diamond Bottoms: Example

Diamond bottom chart pattern example

The above figure shows an example of a diamond bottom chart pattern. Many times the diamond chart pattern is skewed or pushed to one side, making diamonds difficult to spot. In this example, outliers A and B hide the diamond shape.

Notice that price at D tries to climb back to the launch point C but does not quite make it. That is typical behavior so plan accordingly when you trade. This diamond bottom also shows a U-shaped volume pattern.

-- Thomas Bulkowski

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Diamond Bottoms: Other Examples

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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Some pattern names are registered trademarks of their respective owners.

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