Whether exiting a long position or entering a short, a triple top is a reliable indicator that can deliver an early warning to inform your next trade. If you’re looking for a stock charting app, there’s a good chance that you’re also looking for a broker. TradeStation has the best free charting software on the market – and if its proprietary charts aren’t enough for you, it integrates fully with TradingView!
- Conversely, a triple bottom is a bullish reversal chart pattern, indicating a change from a downtrend to an uptrend.
- Since a triple top stock pattern suggests a peak has been reached and a large drop in price is likely, the pattern is considered bearish.
- As you develop more experience, you may be better-able to identify high-potential trades.
- The triple top mirrors the maturation of a bull market when risks emerge, and further gains become challenging.
- The downtrend begins once this level is broken, and support is now resistance.
However, instead of breaking below the support level, the price consolidates and eventually breaks above the resistance. The three peaks in the Triple triple top chart pattern Top pattern are roughly at the same price level, indicating a strong resistance zone that the market is unable to overcome. The support level is created by the lows between these peaks, forming a horizontal line that is crucial for confirming the pattern. Place a short trade when the price drops below the pattern support line.
Enhancing Your Strategy with Confirmation Tools
Resistance and support levels and peaks and troughs will likely never perfectly align. A triple top pattern is a potent weapon to have in your trading arsenal. This powerful technical tool helps traders identify price reversals following a rally. To add confirmation to the pattern, traders will watch for heavy volume as the price falls through support. If the volume doesn’t increase, the pattern is more prone to failure (price rallying or not falling as expected). The triple top pattern is used by technical analysts to predict a reversal after an uptrend and consists of three peaks that are similar in height.
We’ve also covered the main differences between the triple top and the head and shoulders pattern, and concluded that there isn’t that much that sets the two apart. Now, as you know by now we’re in essence waiting for the market to go below the line we’ve drawn by connecting the three bottoms with each other, which is our breakout level. For instance, if the last top is lower than the first one, it shows that selling pressure was quite high, since buyers couldn’t even manage to bring the market up to its recent high.
Trading Triple Top Patterns
A triple top pattern’s alternative names are a „three top pattern“ or a „triple top reversal“ pattern. Similarly, triple bottoms follow the cursive „W“ pattern – with three swing lows separated by bounces painting a series of downward and upward strokes. Now that you understand the psychology behind the triple top forex pattern and its decidedly bearish implications, it’s worth comparing it to similar chart formations. Each peak does not need to hit the same precise level but should spike to roughly match the previous high’s elevation.
This pattern signals a potential shift from an uptrend to a downtrend, providing traders with an opportunity to exit long positions or enter short positions. Triple Top Pattern is a bearish reversal pattern that forms after an extended uptrend. It signifies a potential shift in market sentiment from bullish to bearish. The pattern consists of three consecutive peaks at approximately the same price level, with two minor pullbacks in between. The peaks create a resistance level that the price fails to break, indicating a lack of buying pressure. This failure to surpass the resistance level three times reinforces its significance and suggests a high probability of a downward reversal.
Easy Daytrading RobinHood Strategy
It is not unusual to spot bearish RSI divergence when the final top has registered. Depending on the triple top reversal structure, the inverted V top will vary in size and magnitude. Nevertheless, the idea is that we need a quick move up followed by a quick move down to define a rounded top. While the volume conditions above may seem sound, we want to once again point to the importance of always ensuring that the rules you use are compatible with your market. Now, a triple top will very seldom be perfect, in the sense that all three tops occur at the very exact same level.
Traders often see this reversal chart pattern as a clear sign of market exhaustion, where buyers can no longer push the price higher. This pattern, once confirmed, provides a valuable opportunity for traders to anticipate and act on a potential decline in price. But there are ways to know if a triple top pattern is more likely to fail than work. One of the most common ways is to check if the price structure in the higher timeframe is against the bearish reversal chart pattern. Moreover, lying below the support level are numerous sell stop orders of traders who want to be in a short position once the price breaks below that level. By understanding and mastering the Triple Top chart pattern, you can significantly enhance your technical analysis skills and improve your ability to predict market reversals.