Once again, the stock is pushed back from resistance as supply overwhelms demand. The price heads lower, marking the second trough in the pattern. This trough is typically at a lower level than the preceding one, reflecting weakened momentum. The pattern consists of lines indicating price movements (Price Line) and neck lines (Neck Line). The neck line is drawn along the smallest of the intermediate lows. The start and end points of each price line, except for the last one (point 7), are located in 5/5 pivots.
- This move limits the risk of the trade if the price doesn’t drop and instead rallies.
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- When a triple-top candlestick pattern forms, it indicates a loss in buying momentum and the emergence of selling pressure.
- The triple top represents exhausted buyers who repeatedly get rejected at resistance while sellers distribution accelerates.
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Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. Entering at the second top expecting a breakdown, increases the probability of failure compared to waiting for confirmation. Range-bound situations cause frequent failures and pauses to occur. The key here is to have the Triple Top pattern lean against a higher timeframe Resistance. When you spot higher lows coming into Resistance (also known as Ascending Triangle), this is a sign of strength as it tells you the buyers are willing to buy at higher prices.
These patterns can be used to examine past price movements and predict future ones for a particular trading instrument. Once you’ve identified them, you need to know how to interpret the patterns, such as the rare but powerful triple top and triple bottom patterns. No doubt about it, the triple top formation is considered firmly bearish rather than bullish by technical analysis practitioners.
The triple top is similar to other reversal patterns like the head and shoulders or the triple bottom. The head and shoulders also have three peaks with a central higher peak. But tops form the horizontal resistance in a triple top rather than angled necklines. The increase in volume can confirm the validity of the price breakout.
What are Potential Benefits of Triple Top Pattern Used as a Trading Decision?
This distinctive three-peak shape signals that upside momentum may be waning as resistance from sellers strengthens. Triple bottoms, on the other hand, are bullish in nature because the pattern interrupts a downtrend and results in a trend change to the upside. The triple bottom price pattern is characterized by three unsuccessful attempts to push price through an area of support.
This price action represents a duel between buyers and sellers; the buyers try to lift prices higher, while the sellers try to push prices lower. Each test of resistance is typically accompanied by decreasing volume, until price falls through the support level with increased participation and corresponding volume. The pattern provides technicians with an early warning sign to change bias, adjust targets, or take profits accordingly before a sustained downward move. The triple top pattern works by forming when an asset hits the same resistance level three times without breaking above it, signalling a potential reversal of the uptrend. The triple top is a reversal chart pattern that signals a potential change from an uptrend to a downtrend.
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What are the Parts of a Triple Top Pattern?
The First Pullback and Breakout Re-test allow you to catch a piece of the move after the breakdown. The pullback is usually shallow with small ranged candles (also known as a Bear Flag pattern). And if you chase the markets lower, you’ll likely get stopped out on a pullback.
A pattern with the Indefinable status is deleted if it intersects with a pattern that has a different status. Please note that the information about expected price targets provided by Auto Chart Patterns isn’t a recommendation for what you should personally do. The duration of the price pattern is an important consideration when interpreting a pattern and forecasting future price movement. Price patterns can appear on any charting period, from a fast 144-tick chart, to 60-minute, daily, weekly or annual charts. The significance of a pattern, however, is often directly related to its size and depth.
Traders could enter short or exit longs when the price drops below support at $34. A stop-loss could initially be placed just above the major resistance area. The pattern provides an objective context for executing or avoiding trades. Traders wait for specific setups rather than overtrading without a plan. If you’re looking for a reliable forex broker with excellent trading conditions, check out Pepperstone.
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As the uptrend advances, the price approaches a key resistance level and struggles to break above it. Resistance could be a previous all-time high price, a key Fibonacci or moving average level, or a price zone where the stock has reversed multiple times before. The three peaks are roughly equal in height and are spaced apart over some time. The time between the peaks ranges from a few weeks to several months.
The following is a summary of the triple top pattern’s normal formation process and triple top chart pattern the crucial steps that lead to it. When price finally does break out of the price pattern, it can represent a significant change in sentiment. Figure 1 shows a pennant price pattern that formed on the weekly chart of Alphabet Inc. (GOOG). Once price continued in its established direction, the upward move was substantial. The triple top pattern occurs when the price of an asset creates three peaks at nearly the same price level. After the third peak, if the price falls below the swing lows, the pattern is considered complete and traders watch for a further move to the downside.
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