Triple Tops and Bottoms

Similar to double tops & double bottoms we learned in our last unit. Now, we will discuss triple tops & triple bottoms. 

What are Triple Tops and Bottoms?

These are another type of reversal chart patterns in chart analysis. These are not as prevalent in charts as Head and Shoulders and Double Tops and Bottoms, but they act similarly. These two chart patterns are formed when the price movement tests a level of support or resistance three times and is unable to break through; this signals a reversal of the prior trend.

How to interpret Triple Tops and Bottoms?

As triple tops and bottoms are a reversal pattern, there should be an ongoing trend for reversing. In the case of the Triple Top Reversal, it should be formed at the end of an uptrend and In the case of the Triple Bottom Reversal; it should be formed at the end of a downtrend.

All three highs should be almost equal in the triple top pattern and all the lows should be equal in the triple bottom chart pattern. After the third high or low rise in the volume confirms the formation of this pattern.

Example:

We can see the examples of the Triple Top & Triple Bottom chart pattern formed on the daily chart of Infosys Ltd.

Price target and Stop loss:

In the case of Triple Top, the target should be measured from the neckline to the highs and In the case of Triple Bottom; the target should be measured from the neckline to the lows. Stop-loss can be placed at the highs or lows respectively.

Technical analysts can use this chart pattern for evaluating past and current market activity, and also to forecast future price action to make trading and investing decisions.