The opposite of a bearish triple top pattern is the bullish triple bottom pattern. Then draw a support neckline from left to right that connects the swing low points of the pattern together. This pattern can be quite useful for traders to make financial gains in the market.
This bearish reversal chart pattern is characterized by three consecutive peaks that are roughly equal in height, with two pullbacks in between. The chart below shows Corning (GLW) with a reversal Quadruple Top Breakout in February 2009. Whether continuation or reversal, resistance levels are clear with a Quadruple Top Breakout, and the breakout point is definitive.
Some Points to Consider While Interpreting the Triple Top Chart Pattern:
- Having covered the psychology behind a triple top, we thought that it might be good to have a look at how you can go about to trade the pattern.
- This reliable reversal formation provides clues on shifting market psychology and presents opportunities for technical players.
- By using technical analysis tools such as trendlines, moving averages, and volume, traders can make informed decisions and set stop-loss and profit targets.
- You’ll often find that the three tops have slight variations, but they occur near the same price zone.
Its popularity underscores the pattern’s perceived predictive value for market psychology and its role as a frequent contributor to investment decisions. Gold fails to retake the prior support level at $1,300, which turns it into a resistance line where gold drops below $1,226 from there. Using the same example, if the top is roughly $119 and the support line is $108, the difference is $11. Therefore, a trader might expect the price to fall $11 below the support line once it’s breached. In this case, it would mean the price is expected to continue to slip down to $97. Since a triple top stock pattern suggests a peak has been reached and a large drop in price is likely, the pattern is considered bearish.
Triple Top Chart Pattern with Examples
This reversal is considered a pullback as long as it does not extend too deep. Count the number of filled boxes in the breakout column, multiply by the box size and then by the reversal amount. Other aspects of technical analysis are good to use to confirm objectives and continuously monitor the state of the trend/breakout. The result is a vertical channel between those two levels, and the lowest (for the triple top) or highest (for the triple bottom) point in between is the price to watch next. Once the asset breaks through that level, it should mark the completion of the formation.
A Retest of the Breakout Level
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The Triple Top Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. Although the pattern is hard to find, the Triple Top is a potential identifier of a bearish reversal. Traders can also use other forms of technical analysis to confirm trading signals. There are also double and triple bottom chart patterns, which are upside down versions of the above, and mark the end of a downtrend. The triple top signals an impending breakdown and need to go short—the triple bottom prompts positioning for an upside breakout by going long. The patterns look similar but have opposite implications due to what buyers and sellers are doing around key zones.
By learning from others’ experiences, traders can improve their own trading strategies and increase their chances of success. However, traders need to analyze each strategy and its effectiveness in different market conditions. If you’re triple top chart pattern a trader who wants to maximize profits and minimize losses, then you need to pay attention to the triple top pattern.
How Does Triple Top Pattern Indicate a Trend Reversal?
In between, retracements separate these tops, but every attempt to break higher results in rejection. This then becomes a longer-term resistance zone, often leading to protracted price downside in the meantime. If correctly identified, these chart patterns offer traders valuable insight into an asset’s trading behavior at specific price points. All in all, this makes the head and shoulders pattern somewhat more sudden, since buyers were taken by surprise by the sudden shift in market sentiment. This will make some traders argue that the head and shoulders pattern is more reliable than the triple top.
Triple Top Patterns Trading Strategy
Once complete, a successful triple bottom will spark a resurgence in buyer control, taking the market higher, beyond key levels identified during the triple bottom formation. The triple top mirrors the maturation of a bull market when risks emerge, and further gains become challenging. Its bearish implications are most stark after a long uptrend, signalling the cyclical peaking of positive sentiment.
- The psychology behind the triple top reversal says that buyers are getting exhausted or they aren’t aggressive enough to push the price higher.
- Combined with other technical indicators, the Triple Top Pattern can also act as a confirmation tool, strengthening the conviction of a trend reversal.
- Larger patterns that form over longer time frames are considered more significant.
- The second Spread Triple Top Breakout is a continuation pattern because it formed after a long X-column.
The break of support validates the pattern and confirms the downtrend. The triple top pattern is characterized by three peaks at roughly the same price level and unfolds over weeks to months. Initially, the price rises to a resistance level, encountering selling pressure that halts further upward movement. This resistance reflects market sentiment and the balance between supply and demand. This repeated failure to breach the resistance point signals a shift in sentiment with sellers gaining confidence, anticipating a market reversal.
Triple top trade risk management involves placing a stop-loss order at the high price of the breakdown candlestick. Setting stop-loss orders above the breakout points improves reward risk ratio. Traders typically risk no more than 1% of their trading capital and adjust their position sizes appropriately to match this capital risk.
Consisting of three tops or peaks, the Triple Top identifies downward momentum of the price and surface in an uptrend. Triple top candlestick pattern offers an early alert of buying pressure and the potential trend change ahead. To put into practice the Triple Top Chart trading strategy, we have chosen the GBP/USD triple top reversal highlighted in the above figure.
The same is true for double bottoms against triple bottoms — here, the support zone is reached in two trips before a rebound begins. In the volatile world of crypto, even short-term trends can be strong enough to see triple tops and bottoms form, as speculative buyers and sellers fight for control. For those who don’t know, the head and shoulders pattern consists of three peaks and signals a reversion of the current bullish trend.
