The Diamond Top Set-Up
A top that first broadens into wider and wider swings and then contracts back into a coil, leaving a diamond outline and a narrowing lower boundary that ends it.
MadStockAlerts Research · Updated September 4, 2026
What to take away
- Two phases in sequence: broadening first, then narrowing. Either one alone is a different pattern.
- Broadening swings at a high are disagreement growing, which is what makes this a top rather than a pause.
- The lower line of the narrowing half is the reference the set-up completes through.
- It is rare and it is over-diagnosed; four boundaries give a determined eye a great deal to work with.
- The measured objective subtracts the widest height of the diamond from the break.
MAD Academy Training Video · 1:24
Wider, then narrower, at a high
The rarest shape in this catalogue and the most over-diagnosed. What the two phases mean in sequence, and the honest test for whether one is there at all.
This lesson is part of a Stock Alerts + Tools plan.
The shape
After a substantial advance, the swings get bigger: a higher high, then a lower low, then a higher high again, so the range expands session by session. Then the process reverses and the swings contract back down, giving four boundaries — two diverging, two converging — that outline a diamond.
The order is the pattern. A market that broadens and then narrows has gone through disagreement rising and then being resolved, all at a high. Narrowing that comes first and broadening second is a different shape entirely and does not carry the same reading.
- A clear prior advance for the shape to be a top of.
- A broadening phase with at least two higher highs and two lower lows.
- A contracting phase that follows it, with the swings measurably shrinking.
- Volume high and erratic through the broadening half, falling through the contraction.
Scroll the chart sideways to see all of it.
Why it forms
Broadening swings at a high are a market losing agreement about what something is worth. Each rally finds sellers a little further up and each decline finds buyers a little further down, which is the opposite of the tightening that healthy advances produce, and it is usually a sign that participants with very different views are all active at once.
The contraction that follows is that argument being settled. Volume falls, the swings shrink, and the market arrives at a narrow range that no longer reflects the volatility of the weeks before it. The break out of that coil is the settlement, and the reason it tends to resolve downward is that the broadening phase happened at the end of an advance rather than at the start of one.
Four boundaries is a lot of drawing, and this is the shape where the temptation to make the chart fit the pattern is strongest. The honest test is the sequence: broadening measurably first, contraction measurably second. If the two phases have to be argued for, there is no diamond, and the correct conclusion is that this chart does not have one rather than that the lines need adjusting.
| What to look at | Set-up intact | Set-up failing |
|---|---|---|
| Order of the phases | Broadening first, then narrowing | Narrowing first, or only one phase |
| Volume across the two halves | Erratic and high, then draining away | Flat throughout, no change between halves |
| Where it sits | At the end of a substantial advance | Mid-range, with nothing to reverse |
The price points that define it
A set-up is a shape plus a handful of prices. The shape is what makes it recognisable; the prices are what make it something that can be measured, reviewed afterwards and argued about honestly. These are the levels this one is read from.
| Level | Where it sits | What it tells you |
|---|---|---|
| The lower converging line | Drawn under the rising lows of the contracting half | The reference the set-up completes through. It rises each bar, so the level has to be read fresh rather than remembered. |
| The last lower high | The most recent rejection inside the contraction | Where the reading stops holding, because above it the narrowing phase the drawing rests on has ended. |
| The widest height | The tallest swing of the broadening half | What the measured objective is scaled to, taken at the diamond's widest point rather than anywhere in the coil. |
| The apex of the broadening | The highest high of the whole structure | The ceiling of the shape. Above it the top being described has plainly not happened. |
Where the set-up completes
- 1The triggerThe set-up completes on a close below the lower converging line. Because that line rises through the contraction, a late break requires less of a move than an early one, and the level is properly re-read each bar rather than fixed when the drawing was made.
- 2Where the reading stops holdingThe reading stops holding above the last lower high of the contracting phase, and definitively above the highest high of the whole diamond. The first is where the pattern's claim fails; the second is where the shape it describes has been contradicted outright.
- 3The measured objectiveThe conventional measured objective subtracts the diamond's widest height from the break. Diamonds are wide by construction — the broadening phase makes sure of it — so the target is usually distant, and it is reached considerably less often than the break follows through.
- 4Through the moveThe convention expects the break to be fast, on the same logic as any contraction: the narrow range has removed the resting orders that would slow a move. A break that stalls just under the line rather than accelerating away has usually failed, and diamonds that fail tend to resume the advance that preceded them.
Each of these describes where a convention puts a level, not what anybody should do at it. Whether a level is worth acting on at all is a question about position size, cost and the rest of a plan, and the answer differs for every account.
How often it follows through
The lowest band in this file, and it belongs there. Genuine diamonds are rare, the shape is unusually easy to draw onto a chart that does not have one, and the published statistics rest on small samples selected after the fact. Only a structure with both phases plainly visible belongs anywhere near the top of this band.
Read that as a floor rather than an expectation. A set-up that follows through two times in three still leaves one in three that does not, and the one that does not can move further and faster than the two that did. That arithmetic is what position sizing exists to answer, and no pattern improves it.
What this number is not
It is not our record, it is not a forecast for any particular chart, and it is not the rate at which the measured objective is reached — that is always lower. It is a conservative reading of how often a completed diamond top kept going before it went back through the level that invalidates it. Base rates move with the market, the timeframe and the exact definition used, and every one of those varies.
What failure looks like
The failure is the contraction resolving upward. Price leaves the coil through the top rather than the bottom, clears the last lower high, and the advance the diamond was supposed to be reversing simply continues. Because the broadening phase produced a wide structure, that failure can travel a long way before it is obvious that the pattern was wrong.
- The two phases are not clearly separate — the shape broadened and narrowed at once.
- Volume does not fall through the contraction.
- The break of the lower line closes back inside the coil within days.
Scroll the chart sideways to see all of it.
Seeing it on a live chart
Draw the broadening half and stop. If the widening phase does not stand on its own — two higher highs and two lower lows without any special pleading — there is no diamond, and drawing the second half will only make a shape that was never there look convincing.
Open Chart Pro — for members