The projected target is equal to the triple top pattern height subtracted from the breakdown point. Traders watch for increasing volume on the breakdown for conviction. The pattern unfolds over weeks or months and requires patience to monitor the battle between buyers and sellers.
- The middle peak is equal to the left and right peaks instead of being higher than the two.
- Traders wait for specific setups rather than overtrading without a plan.
- Shallow retracements maintain the horizontal support level and indicate solidifying resistance.
- But tops form the horizontal resistance in a triple top rather than angled necklines.
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In order for the pattern to be considered a triple top, it must occur after an uptrend. The opposite of a triple is a triple bottom, which indicates the asset’s price is no longer falling and could head higher. Strike, founded in 2023 is a Indian stock market analytical tool. Strike offers free trial along with subscription to help traders, inverstors make better decisions in the stock market.
How To Trade the Triple Top Pattern
1.When a pullback occurs, it gives you a logical level to set your stop loss. For example, your stop loss can go above the highs of the pullback (instead of the highs of the Triple Top pattern). This means you’re selling when buyers are about to step into the markets — not a good idea.
Profit targets are open below support, providing a favourable risk-reward scenario. The triple top pattern offers the following ten advantages when making trading decisions, including early warning signals, high probability setup, etc. The depth of the retracements between tops also contributes to pattern validity.
Inside the Rare But Powerful Triple Tops and Bottom Technical Analysis Patterns
If a stock makes three equal highs and does not break, it is a good idea not to try and go long. Traders often wait for the price to break below the support level, which confirms the pattern completion. When a triple-top candlestick pattern forms, it indicates a loss in buying momentum and the emergence of selling pressure. The first peak will represent the exhaustion of bullish buying, which will result in a minor pullback. Now, there are times the market breaks down quickly after forming a Triple Top chart pattern and you’re not fast enough to catch move.
For example, adding volume analysis to a triple top shows if momentum is building on the breakout. High volume on the upside breakout adds confidence it will continue rising. There are eight parts for a triple top pattern—the first peak forms when the asset price reaches a resistance level, unable to break higher. After selling off, the first trough occurs, where the decline halts and buying resumes. This lifts the asset back up to the same resistance zone, forming the second peak around the same height before selling absorption. A triple top pattern consists of several candlesticks that form three peaks or resistance levels that are either equal or near equal height.
The volume pattern typically diminishes with each successive peak. The decreased volume shows waning buying pressure as the tops form. After the third peak, volume picks up as sellers take control and drive the price below support. These extensions of M and W pattern formations signal whether buyer or seller conviction strengthens at extremes. For triple top and triple bottom chart patterns, the cursive M and W shape shows buyers remain active on three separate attempts to conquer resistance (support). But their failure highlights waning momentum that gives way to profit-taking.
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While not a definitive signal, a confirmed triple top gives technicians reason to adopt a bearish bias and anticipate further downside follow-through. Its popularity underscores the pattern’s perceived predictive value for market psychology and its role as a frequent contributor to investment decisions. If the indicator finds two intersecting patterns, then preference is given to the one whose status is Awaiting.
You’ll notice that the pattern took a while to form, so if you waited, you could miss a lot of trade entries. The triple top formation caused a cup and handle failure, which became a falling wedge. The bearish harami pattern was the warning sign, which turned into an evening star pattern to confirm the reversal. A Triple Top is a bearish reversal chart pattern that signals the sellers are in control (the opposite is called a Triple Bottom pattern).
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Volume on each successive peak usually declines, showing waning buying interest at resistance. After the third peak fails to surpass resistance, sellers take control and push the asset downward, breaking the sequence of higher highs. The formation of the triple top pattern begins when the price rises and hits a resistance level, retreats, and then returns to test the resistance again, forming the first two tops. After failing to break through the resistance for the second time, the price pulls back again before making one final attempt to break through the level. However, it is again rejected, and the price falls below the support level, completing the triple top pattern. The peaks form a resistance level that the price fails to break, which suggests a lack of buying pressure.
Notice the three crests just below $1,365, demonstrating firm resistance limiting further gains. Once support finally broke leading to a decline, the pattern was confirmed. Secondly, keep an eye out for three distinct peaks at roughly the same price level. It doesn’t have to be exactly the same, but the tops should cluster within a few percentage points. There is often some period of consolidation after the first two tops before pushing up again. We don’t care what your motivation is to get training in the stock market.
How to Interpret the Triple Top Pattern?
But after the third test failed, gold triple top chart pattern broke support around Rs. 1250, completing the pattern. Astute traders like Paul Tudor Jones executed short positions on the breakdown for large gains as gold declined over Rs. 200 in the following months. Specifically, traders will look to initiate a short trade once the asset price breaches support after the third peak. This breakdown signals sellers have overwhelmed buyers, and the uptrend is reversing. The stop loss should then be placed just above the high of the third peak, which also marks the resistance zone the asset failed to overcome three times.
Typically, when the third peak forms, it cannot break above the first two peaks and causes a triple-top failure. Identifying the Triple Top pattern requires careful observation of price and chart patterns. Traders frequently use technical tools such as support, trendlines, resistance levels, and oscillators to find patterns.
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