The Triple Top




The Triple Top trading stock pattern is a reversal pattern made up of three equal highs followed by a break below support, one more additional high than it's cousin, the Double Top.

Triple-tops usually form over a range from 3 to 6 months.



Triple Top

Chart by MetaStock




Throughout the development of the triple-top, it can start to resemble a number of patterns. Before the third high forms, the pattern may look like a Double Top.

The Triple-Top 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-top pattern:


  • Prior Trend: With any reversal pattern, there should be an existing trend to reverse. In the case of the triple-top, an uptrend or long trading range should be in place.

  • Three Highs: All three highs should be reasonable equal, well spaced and mark significant turning points. The highs do not have to be exactly equal, but should be reasonably equivalent to each other.

  • Volume: As the triple-top develops, overall volume levels usually decline. Volume sometimes increases near the highs. After the third high, an increase of volume on the decline and at the support break greatly reinforces the pattern.

  • Support Break: The triple-top is not complete until a support break with higher volume. The lowest point of the pattern, which would be the lowest of the intermittent lows, marks this key support level.

    The OBV Indicator can be used to confirm the break.

  • Support Turns Resistance: Broken support becomes potential resistance, and there is sometimes a test of this newfound resistance level with a resulting reaction rally.

  • Price Target: The distance from the support break to highs can be measured and subtracted from the support break for a price target. The longer the pattern develops, the more significant is the ultimate break.

    Triple tops that are 6 or more months old represent major tops and a price target is less likely to be effective.



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Conclusion

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When looking for 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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