The Triple Bottom and Triple Top Pattern is used in technical analysis to indicate a trend reverse pattern after a long bearish or bullish rally. The triple bottom occurs when the price of the stock makes three different downward advances at the same price level, before the trend breaks and reverses.
Triple top / bottom pattern
- A triple bottom has three swing lows at the same price level,
- Triple top has three swing highs at the same price level.
- It can be can also relate it to the head and shoulder chart pattern. Just in this case, the middle axis is equal to the other two pivots.
- The triple bottom represents two unsuccessful attempts to push down from the support established by the first swing low. Therefore this indicates a trend reversal. So that breakout above the resistance line confirm the reversal.
- Similarly, the triple top shows two unsuccessful attempts that one tries to move upward and one that reverses the slowdown.
Trade with triple top / bottom pattern
For the triple bottom chart pattern, buy:
• Buy above the break-out point of the the resistance line; or
• On the pullback to the resistance line (now acting as a support) after the breakout.
However, it can be difficult to draw the resistance line of a triple bottom, especially if the two swing highs are uneven.
How to draw the resistance line:
• higher swing high; or
• Second swing high; or
• Somewhere between two swings high.
For triple top chart pattern, sell:
• At break-out below the support line; or
• On the pullback for the support line (now acting as resistance) after the break-out.
How to draw the supporting line:
• Low swing with low; or
• Second swing with low; or
• There were two swings in the middle.
The volume should increase when the price goes out of the resistance / support line. In case of triple tops, it should also decrease with each fluctuation. For the triple bottom, the volume should decrease with each down swing. For the target objective, measure the height of the pattern and project from the break-out point.