Diamond Top Formation
A technical analysis reversal pattern that is used to signal the end of an uptrend. This relatively uncommon pattern is found by identifying a period in which the price trend of an asset starts to widen and then starts to narrow. This pattern is called a diamond because of the shape it creates on a chart.
Investopedia Commentary
Since technical traders use this pattern to predict a reversal of an uptrend, a short position is taken when the price falls below the lower ascending trendline. In general, price targets are usually set to be equal to the entry price minus the distance between the top and the bottom of the pattern.
Related Links
Introducing The Bearish Diamond Formation
Price Patterns - Part 1
Price Patterns - Part 2
Price Patterns - Part 3
Price Patterns - Part 4
See also: Chartist, Head and Shoulders Pattern, Pattern, Reversal, Short (or Short Position), Technical Analysis, Trend
Also spelled: Bearish Diamond Top, Diamond Top, Diamond Formation