What Is a Diamond Pattern

Wider, then narrower

A diamond is a stretch of chart where the swings first get wider and then get narrower. Between late April and mid-June 2024 the Dow made a high of 38,576, a low of 37,701 and a higher high of 40,095 — each swing bigger than the last — and then a higher low of 38,019, a lower high of 39,159 and a higher low of 38,281, each swing smaller. Lines through those six points make four sides, and the four sides make the outline of a gem.

The name

The name comes from the two halves. The left half is a broadening shape: the highs rise and the lows fall, so the outline opens like a megaphone. The right half is a triangle: the highs fall and the lows rise, so the outline closes. Glued together at the widest point, the two halves make a cut gem. It is rare, because it asks the market to do two opposite things in a row: swing more and more, then less and less.

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