11MiscellaneousPatternsDiamondsDiamond patterns really consist of a small orthodox broadening formationpreceding a symmetrical triangle. An example is shown in Fig. 11-1. Edwardsand Magee describe a diamond as a head and shoulders with a V-shapedneckline, which is what it really is. Figure 11-2 shows the same example asFig. 11-1, but this time with a head and shoulders type of interpretation.Diamonds tend to develop more at tops than at bottoms and usually requiresome poetic license to construct. This is because the rally highs and declinelows do not usually match up exactly with the two diverging and convergingsets of lines required to construct an idealized pattern. Sometimes theydo, but in most cases they do not.Rectangles, with their two parallel lines of support and resistance, arepretty easy to define. Diamonds, on the other hand, often involve some creativityin their construction. Unless you are careful, this inability to be morespecific can lead to problems. To put it another way, it is easy for the noviceto visualize a diamond formation that is not actually there.The measuring requirement works on the same principle as that for otherformations. Figure 11-1 shows this principle in action. Chart 11-1, featuringBMC Software, offers an example of a diamond formation that turned outto be a consolidation during an uptrend. Chart 11-2, for the same company,shows another possibility, this time for a top. The dashed line is there topoint out the similarities between a diamond and a head-and-shoulders top.
This is because the dashed line is really the neckline of a head and shoulders.
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