A complete breakdown of how to successfully use triple tops and triple bottoms to find trend reversals.
Official Terminology
Triple Top – 3 equal and successive highs followed by a break of support following the last high. A bearish pattern.
Triple Bottom – 3 equal and successive lows followed by a break of resistance following the last low. A bullish pattern.
Overall Concept
Whether we are examining a triple bottom or triple top, everything is pretty much the same except for the difference in sentiment each gives.
In a triple top, a reasonable price target is the length between the highs and support.
The triple top and bottom are not complete until a breaking of their respective support or resistance. In order to limit risk, it is best to wait till a breaking has occurred before executing any trades.
Concept in Action
The chart above shows exactly how triple top looks and reacts after the third high. A triple bottom would resemble exactly the opposite of this chart.
While all three highs in a set do not have to be exactly equal, the closer they are the better chance of seeing more accurate results.
Important Notes and Reminder
1. The pattern is not complete until breaking of support or resistance.
2. A good price target is the distance between the triple set and point of breakout.
3. A full triple top indicates a bearish sentiment; a full triple bottom indicates a bullish sentiment.