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The bullish cousin. A diamond shape at the bottom signals accumulation complete and reversal beginning.
The Diamond Bottom is a reversal pattern that forms at the end of a downtrend. It combines a broadening formation (expanding swings) followed by a symmetrical triangle (contracting swings), creating a diamond-shaped outline.
The pattern represents the transition from chaos to order at a market bottom. First, selling creates increasingly volatile swings (the broadening left half). Then, as exhaustion sets in, the swings contract (the symmetrical right half). The resolution is typically an upside breakout.
The Diamond Bottom charts the emotional journey from panic to calm. The left half broadens as selling intensifies โ each swing is more extreme, marking capitulation and maximum fear. Volatility peaks.
Then a shift occurs. The swings start narrowing on the right side. Selling exhaustion sets in, buyers begin absorbing supply, and the market transitions from chaotic to orderly. The contracting range shows that a new equilibrium is forming at the lows.
The upside breakout from the diamond signals that the transition is complete โ supply is exhausted and demand is gaining control. Measured move targets use the widest point of the diamond projected upward from the breakout.
Conservative: Enter long on a break above the diamond's upper trendline with volume.
Aggressive: Enter long when price shows strength in the contracting phase.
Below the low of the diamond formation. If price breaks below the pattern's lowest point, the bullish reversal is invalidated.
Measured Move: Height of the diamond (widest point) projected upward from the breakout. T1: 50-75% of measured move. T2: Full projection. Diamond bottoms are rare but powerful.
Typically 1:2 or better. The well-defined structure creates clear invalidation levels.
Diamond Bottoms are relatively rare and can be tricky to identify in real-time. They're most reliable on daily or weekly charts and are often only recognized after the right half starts forming. The broadening-to-contracting sequence is the key identifier.
Even rarer than diamond tops. If you spot one forming, the breakout from the right side of the diamond is high-probability.
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