A worked example that explains the rule, not a stock price. The circle marks the first close beyond the level. The blue line is the target. The orange line is the invalidation. Prices are in the right-hand column, and sessions sit under the volume bar.Hollow green candles closed above their open, and filled red candles closed below it.
Numbers in the example chart
From the same calculation that draws the shape and writes the "Measuring the target" section below.
Trigger level
$65.1 · at the close of session 63
Target
46.5$
Invalidation
68.0$
Pattern height
18.6$
Chart span
76 sessions
What it is
Swings that widen and then contract, drawing a diamond. It describes a peak of emotion: a sharp disagreement over value that widens, then a hesitant consensus that contracts before the decision.
A close above the last high inside the contraction.
Reading it stage by stage
WideningHigher highs and lower lows: a sharp disagreement over value on choppy volume.
ContractionLower highs and higher lows: hesitation before a decision, and volume dries up.
BreakdownA drop from the lower right edge. ⚠ Rare and easy to imagine · if the widening followed by contraction isn't clear without stretching, it is not a diamond.
Recognition rules
It usually appears after a sharp rise.
The first half is a widening formation (higher highs and lower lows).
The second half is a contracting formation (lower highs and higher lows).
Volume is high and choppy during the widening, and falling during the contraction.
Confirmation is a downside break of the lower right edge.
Measuring the target
The diamond's maximum height is subtracted from the breakdown point.
Where it fools you
Rare and easy to imagine. Any random swing can be boxed in by four lines that look like a rhombus. If the widening followed by contraction isn't clear without stretching, it is not a diamond.
Open the daily timeframe for any symbol and draw the pattern yourself. Your drawing is saved per symbol in your browser, and the terminal does not name or detect the pattern.
╱ TrendlineWidening and contraction
⇕ MeasureTarget equals pattern height
We do not detect chart patterns with a numeric rule: telling them apart takes judgment on the chart. Candlestick patterns with a numeric rule are detected daily by the candlestick pattern scanner.
The mirror image: the diamond bottom
The same pattern turned upside down, with the same rules in the opposite direction: what was a top becomes a bottom, and the trigger, target and invalidation all flip direction.
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