After a rally to a new high, Diamond Top then shows weakness to an intermediate support level. A second rally then reaches a new high but a sharp decline takes it through support; a smaller third rally will then occur before a decline right through the longer-term trend. Again, diamonds are large patterns which means that the technical implications will also be large. By subtracting the difference between the reaction low from the breakout level and the record high, you can find the technical targets. If you draw a trend line from the reaction low to the first low of any significance (on the right side), you can determine the breakout level.
When this pattern is seen, it will normally form at market tops rather than bottoms but the whole pattern is actually rare. The fact that the pattern alone is a diamond shape represents a somewhat confused market. As the pattern starts with a broadening section, it soon consolidates to form a symmetrical triangle. The geometry then takes shape because there is a distinct pattern taking place due to the combination of the broadening and consolidating. As the trend lines are drawn and the peaks/valleys are connected, the shape becomes more obvious. After seeing the diagram, you will also notice that it has similar core values to the head & shoulder pattern but with a very different center movement.
In terms of volume, this is where you can tell the difference between the diamond and the head & shoulder patterns. When a decrease in volume is seen during the latter half of the pattern, then you know that it is forming a diamond shape as opposed to any other. In truth, the volume pattern seen is actually similar to that of the symmetrical triangle. The downwards movement is normally fairly significant after the diamond first forms and the minimum movement can actually be predicted by measuring the distance between the two widest points of the shape. Then, the prices will drop to a low after the breakout price which gives a similar net change.