Diamond Bottom Chart PatternDiamond Bottom is a bullish signal indicates that the stock price may rise. For a layman we will try to explain the same with the chart below and it will show you that price appears to have bottomed out and thus reversal appears in near future.
This Diamond bottom pattern shows that the chart is showing signs of reversal as it has broken upward after a period of uncertainty or consolidation.
When Diamond Bottom Pattern is formed?
- The Diamond Bottom pattern begins during a downtrend as prices create higher highs and lower lows in a broadening pattern.
- Then the trading range gradually narrows after the highs peak and the lows start trending upward.
- When the price breaks upward out of the diamonds boundary lines, it marks a significant reversal to a new uptrend.
We have detected this chart pattern in Hind Zinc and we see it achieving new highs unless some global news cast any aspersion on the integrity of the stock. You can see the way to trade Hind Zinc to make money here.
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, point A) or subtract it (downward breakouts, point B) from the breakout price to get the price target (C).
See the Price Trend Rule
See 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) price trends leading to the diamond perform best.
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