Triple top pattern: Definition, Importance, Benefits, Risks

Confluences like a proper retest and bearish candlestick patterns are observed for strengthening a trade setup for the short side. In the example above, observe how lower lows are forming since the beginning of the consolidation. The price managed to resist the upper resistance, which was followed by a series of lower lows and lower highs, indicating the possibility of a trend towards the bearish side. The range of the rectangle is taken as the target range at the time of entry.

What is a Triple Top Chart Pattern?

Another tactic is waiting for a pullback or throwback to resistance before buying. The study “Market Dynamics and Trade Success” by the Market Analysis Group in 2021 found that waiting for a pullback increased trade success rates by 55%. Traders also use options, wider stops or small size to control risk. The key is having a plan ready and not chasing every breakout seen on the chart. False breakouts are avoided by waiting for confirmation before entering a trade based on a chart pattern.

What is Bull Flag Pattern in Trading

A triple top pattern failure, also known as a “failed triple top reversal”, is when a triple top forms but prices fail to contine lower. 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.

Chart patterns exhibit a degree of accuracy in predicting price reversals, with a 2000 study by Bulkowski attributing an 89% success rate to the head and shoulders pattern. Chart patterns should be used in conjunction with other analysis techniques such as volume, momentum indicators, and fundamentals for improved reliability. The V pattern is a reversal chart pattern depicting a quick change in the market trend. The megaphone pattern is considered a neutral continuation pattern, with both upside and downside potential. The expanding volatility makes directional bias unclear, though traders often interpret the last swing as an indication of the likely breakout direction. A break above the upper trendline signals an upside resolution and entry for longs, while a drop below the lower trendline signals a bearish resolution for shorts.

It consists of three distinct peaks, all reaching similar price levels, followed by a breakout below the support level formed at the pattern’s lowest points. The triple bottom pattern is a chart pattern seen in technical analysis that is characterized by three successive troughs in the price of a security at around the same level. A triple bottom pattern forms when a security’s price tests a support level three times, creating three distinct low points at roughly the same price level, before breaking out above resistance. The pattern has the appearance of the letter “W” with the two higher lows forming the sides and the resistance level acting as the ceiling. The descending triangle is a bearish reversal chart pattern that forms after an uptrend and signals a potential trend change from bullish to bearish. The descending triangle shows a series of lower highs and lower lows, where a downtrending support line forms the hypotenuse of the triangle and a horizontal resistance line forms the base.

1. A sharp increase in trading volumes signals the beginning of the pattern formation, which confirms the market entry point.
2. Therefore, a significant increase in volume during the breakout below the support level strengthens the validity of the pattern.
3. The bullish pennant pattern is a continuation pattern that appears in an uptrend, signalling a pause in the rally followed by a resumption upwards.
4. Price is expected to retest this stair and continue its trajectory towards upside.
5. A bullish ‘Morning Star’ pattern shows strong buying resuming after a downtrend, signaling a potential bottom.

Main Groups of Chart Patterns

1. The market price breakdown component of the pattenr is caused by bullish traders selling their positions and new short sellers entering the market.
2. The repeated failed attempts to break resistance reflect the depletion of buying power.
3. Triple Top is a reversal pattern formed by three consecutive highs that are at the same level (a slight difference in price values is allowed) and two intermediate lows between them.
4. This allows the stock room to fluctuate while maintaining our risk parameters.
5. A valid triple top usually sees corrections less than 50% of the prior up move.
6. To calculate the triple top formation time, multiple the chart timeframe used by 80.

This creates the diamond shape on the chart as the price forms lower lows and lower highs into the bottom reversal point. The price range between the neckline and the bottom is known as the depth of the base. This price range is eventually considered a potential target price of the bullish move when the price finally breaks above the neckline. Confluences like a proper retest and bullish candlestick patterns are observed for strengthening a long trade setup.

However, both patterns are important and should be analysed with other market factors. The triple top short trade entry point is set right as the asset price breaks below the predefined pattern’s support line. This support zone breach is the sell signal and this is known as the tripe top breakout level. The first triple top pattern trading step is to identify the triple top in a market. Scan for triple tops using a pattern scanner or browse the price charts manually for the pattern formation.

Is a Triple Top Stronger Than a Double Top?

Observe the example above to study how price forms an upward stairs to continue its trend towards upside. The range of this candlestick triple top chart pattern setup is taken as the minimal take profit range. Traders take additional confirmation from technical indicators and other price action tools to solidify a trade setup. Channel patterns are technical chart formations that illustrate the movement of a security’s price oscillating within a parallel upward and downward trend. The upper and lower boundaries create a visual channel that contains the price action over a specified timeframe. The upper trendline connects the highs, while the lower trendline connects the lows of the price bars.

This means the stock or asset has been steadily rising over weeks or months. The uptrend is identified by higher swing highs and higher swing lows in the price action. A double top pattern has two peaks and signals a bearish reversal, while a triple top pattern has three peaks, offering a stronger indication of resistance and a bearish trend shift. A common approach is to use the 50-day and 200-day moving averages. If the price breaks below the support level and the 50-day MA crosses below the 200-day MA (a bearish crossover), this signals that the downtrend is likely to be sustained. The support level is crucial in a triple top pattern because the bearish signal is only confirmed when the price breaks below this level.

Moving Averages

The 4 triple top pattern components are a left swing high peak, middle swing high peak, right swing high peak, and a support trend line. Pattern trading is one of the most popular methods among small and medium capital traders. Patterns are easily spotted on the chart as their formation levels are clearly pronounced.