What is this Diamond figure
Figure "Diamond" (from english. – «Diamond») also called "Crystal", "Diamond", "Rhombus". The formation consists of two configurations - divergent and symmetrical (converging) triangles. In theory, this pattern serves as a signal for a trend change or at least a correction in the average- or long-term movement of an asset.
The beginning of a pattern occurs at the end of an impulse movement along a trend. Quotes are slowing down, thereafter, price fluctuations rise slowly. But the movement takes place within the divergent triangle (left half of the diamond). Then the opposite movement occurs - the volatility gradually decreases and the final formation of the pattern can be observed.
Figure for sales
An example for the start of growth in Severstal shares (CHMF)
An example for the fall of Cloudera shares (CLDR)
Such a formation is quite rare on the charts.. The higher the volatility of the asset, the more often the pattern can be seen on the chart. When forming a pattern: the older the timeframe, the stronger the signal. If a pattern appears on the 4-hour chart and below, reversal signal is weak. Higher probability for signal processing - from the daily timeframe and above.
If a pattern is found on the daily chart, do not forget about the growth or fall targets on the monthly and weekly charts of the asset.
In this case, the probability of the situation is high, when the diamond pattern has worked out a sell signal on the daily chart, fulfilling the rhombus height targets. After that, the asset can continue its movement according to the goals in the opposite direction on the higher timeframe.