3.9 Triple Top and Triple Bottom Chart Patterns
Triple Top Pattern
Triple Top chart pattern is just an extension of the double top pattern. This pattern forms when the price-action fails to break below the neckline decisively, after the second peak. The price goes up again and finds another resistance near the same level as of the previous two peaks. In case the price had broken below the double-top's neck line and you had entered into a short-selling position then your position may hit your stop-loss order. However, with a triple top pattern in place, you get another chance to trade if the price breaks below the lower neckline again.
Formation of a Triple-Top
How to trade a "Triple-Top"?
You can take a short-selling position when the price breaks below the neckline. Please note that you may already have a neck line for the previous two peaks or tops and the price-action might have broken that before forming the third top. In such case you need to enter the market when the price breaks below the lower neck line.
Many times even after the break of this support zone, there are some upward pullbacks. If you can make an entry when such a pullback takes place, it may increase the gains. Caution is required if the pullback is very strong as that may represent failure of the pattern.
The profit target would be equal to the distance from the neck line to the three peaks. The above diagram and Forex chart with the three tops explains it clearly.
Just like the triple top a Triple Bottom chart pattern is an extension of the double bottom pattern. Triple Bottom formations are reversal patterns with bullish sentiments.
Formation of triple top chart pattern
As shown in the above diagram, a triple top pattern forms when the price-action fails to break above the neckline decisively after the second bottoming.
The price goes down again and finds another support near the same level as of the previous two bottoms. In case the price had broken above the double-bottom's neck line and you had entered into a long position then your position may hit the stop-loss order. But, with a triple bottom pattern you get another chance for another entry.
How to trade with a Triple Bottom?
Well, not a rocket science when we have already seen the double bottoms. Yes, the same way. You can but when the price breaks above the neckline. Please note that the neckline represents a resistance zone and not a fixed price point. Consider a breakout only when the price moves out of that resistance zone. Your first profit target would be the average distance between the neckline and the three bottoms.
- Trading with Triple Tops and Triple Bottoms