ETH-BTC Diamond Chart Formation

The Diamond pattern is a rare, but reliable chart pattern. Diamond chart reversals rarely happen at market bottoms, it most often occurs at major tops and with high-volume. Bulkowski's (2005) research states that the diamond bottom breaks upward 69% of the time. Bulkowski emphasizes that a diamond bottom with a breakout move downward is ranked as being one the best performing patterns. You should always use a stop loss order when trading the diamond pattern. The proper location of your stop should be above the last top inside the diamond for bearish setups and below the last low of inside the diamond for bullish setups.

Price targets:

Suggestions for trading the diamond top and bottom are given by Kirkpatrick & Dahlquist (2010): the price target is usually the same as the distance price moved to reach the diamond pattern; however, if the price move after the breakout is sluggish, the position should be closed out or tight protective stops should be implemented. Bulkowski (2008) gives more precise breakout targets:

Diamond Bottom Upward Breakout Price Target:
Breakout Price + ((Highest Peak of Diamond Pattern - Lowest Valley of Diamond Pattern) * 81%)

Diamond Bottom Downward Breakout Price Target:
Breakout Price - ((Highest Peak of Diamond Pattern - Lowest Valley of Diamond Pattern) * 63%)

Diamond Top Upward Breakout Price Target:
Breakout Price + ((Highest Peak of Diamond Pattern - Lowest Valley of Diamond Pattern) * 69%)

Diamond Top Downward Breakout Price Target:
Breakout Price - ((Highest Peak of Diamond Pattern - Lowest Valley of Diamond Pattern) * 76%)


(Source: FinVids.com)