The Triple Bottom




The Triple Bottom stock pattern is a reversal pattern made up of three equal lows followed by a breakout above resistance.

While this pattern can form over just a few months, it is usually a long-term pattern that covers many months. Because of its long-term nature, weekly charts can be best suited for analysis.



Triple Bottom

Chart by MetaStock




As the triple-bottom develops, it can start to resemble a number of patterns. Before the third low forms, the pattern may look like a double bottom.

The triple-bottom should also be treated as a neutral pattern until a breakout occurs.



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The following are key points in confirming the triple-bottom pattern:


  • Prior Trend: With any reversal pattern, there should be an existing trend to reverse.

  • Three Lows: All three lows should be reasonable equal, well spaced and mark significant turning points. The lows do not have to be exactly equal, but should be reasonably the same.

  • Volume: As the triple-bottom develops, overall volume levels usually decline. Volume sometimes increases near the lows. After the third low, an increase of volume on the advance and at the resistance breakout greatly reinforces the pattern.

  • Resistance Break: The triple-bottom is not complete until a resistance breakout c/w high volume.

    The OBV Indicator can be used to confirm the break.

  • Resistance Turns Support: Broken resistance becomes potential support, and there is sometimes a test of this newfound support level with the first correction.

  • Price Target: The distance from the resistance breakout to lows can be measured and added to the resistance break for a price target. The longer the pattern develops, the more significant is the ultimate breakout.

    Triple-bottoms that are 6 or more months in duration represent major bottoms and a price target is less likely to be effective.



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Conclusion

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When looking for triple-bottom patterns, it is important to keep in mind that technical analysis is more art and less science.

If you are looking for the perfect pattern, it may be a long time coming.


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Recommended Stock Chart Patterns Tools and Resources


Recommended Technical Analysis Tools and Resources


Recommended Technical Stock Market Software

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