Triple Top and Triple Bottom patterns are the types of reversal chart patterns.
Triple Top is a bearish reversal chart pattern that leads to the trend change to the downside.
Whereas Triple Bottom is a bullish chart reversal pattern that leads to the trend change to the upside.
They are extensions of the Double Top and Double Bottom chart patterns.
In this blog, we will discuss the formations of these chart patterns and how to trade them:
What is the Triple Top Pattern?
A triple top chart pattern is a bearish reversal chart pattern that is formed after an uptrend.
This pattern is formed with three peaks above a support level/neckline.
The first peak is formed after a strong uptrend and then retrace back to the neckline.
The formation of this pattern is completed when the prices move back to the neckline after forming the third peak.
When the prices break through the neckline or the support level after forming three peaks then the bearish trend reversal is confirmed.
What is Triple Bottom Pattern?
A triple bottom chart pattern is a bullish reversal chart pattern that is formed after the downtrend.
This pattern is formed with three peaks below a resistance level/neckline.
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The first peak is formed after a strong downtrend and then retrace back to the neckline.
The formation of this pattern is completed when the prices move back to the neckline after forming the third peak.
When the prices break through the neckline or the resistance level after forming three peaks then the bullish trend reversal is confirmed.
Formation of the Triple Top and Triple Bottom Pattern
Here is how Triple Top and Triple Bottom chart pattern is formed –
Trading with Triple Top
There are some rules when trading with Triple Top chart patterns.
- Firstly one should identify the market phase whether it is in uptrend or downtrend. As the triple top is formed at the end of an uptrend, the prior trend should be an uptrend.
- Traders should spot if three rounding tops are forming.
- Traders should only enter the short position when the price breaks out from the support level or the neckline.
Stop Loss
In the case of a Triple Top chart pattern, the stop loss should be placed at the third top of the pattern.
Price Target
The price target should be equal to the distance between the neckline and the tops.
Trading with Triple Bottom
There are certain rules when trading with Triple Bottom chart patterns.
- Firstly one should see the market phase if it is up or down. As the triple bottom is formed at the end of the downtrend, the prior trend should be the downtrend.
- Traders should spot if three rounding bottoms are forming and also note the size of the bottoms.
- Traders should only enter the long position when the price breaks out from the resistance level or the neckline.
Example
From the below example of the daily chart of Infosys Ltd. we can see how bullish reversal takes places after the formation of the triple bottom pattern at the end of the downtrend:
Stop Loss
In the case of the Triple Bottom pattern, the stop loss should be placed at the third bottom of the pattern.
Price Target
The price target should be equal to the distance between the neckline and the bottoms.
Key Takeaways
- Triple Top and triple bottom pattern are the types of the reversal chart pattern.
- A triple top chart pattern is a bearish reversal chart pattern that is formed after an uptrend.
- A triple bottom pattern is a bullish reversal chart pattern that is formed after the downtrend.
- There are certain rules when trading with these patterns.
