Therefore, the triple top pattern is a triple top chart pattern powerful bearish reversal signal. It indicates that the market has tested the resistance level three times and failed to break through, showing that the bullish momentum is exhausted. As the price falls, it puts pressure on all those traders who bought during the pattern to start selling.

What Is the Difference Between a Double Top Pattern and a Triple Top Pattern?

Gap pattern’s structure is characterized by empty space on the price chart between the open or close, representing a sharp movement in price without trades occurring in the interim price range. The sideways price action forms a channel between two parallel trend lines – an upper resistance line and a lower support line. This pause in the uptrend forms the flag shape before the prior trend resumes. Traders often use symmetrical triangles to anticipate potential breakouts and trade resumptions of the prior trend.

1. Temporary exhaustion is likely after the spike so sideways consolidation or a pullback sometimes occurs before the trend extends further.
2. Validation occurs on a close above the high of the pattern, indicating bulls have overpowered bears.
3. Gap pattern’s structure is characterized by empty space on the price chart between the open or close, representing a sharp movement in price without trades occurring in the interim price range.
4. This is how this pattern plays a crucial role in taking trades based on trend flipping.
5. Wave 1 reflects initial optimism as the trend starts, and wave 3 shows extreme optimism and accelerated price movement as more participants join the trend.

The price made a series of higher highs after the breakout and took several months to retest the broken resistance that got converted into a support structure. Bullish engulfing pattern at the time of retest strengthens a trade setup alongside other confluences gathered from technical indicators. Spike patterns are usually continuation patterns, extending the current trend.

What is the Success Rate of Triple Top Pattern?

This rare chart formation is also able to transform into a continued channel. A trader sets a pending order to sell slightly below the pattern’s two previous lows. Most of the rules that are applied in the formation of the triple top can be reversed in the formation of triple bottom.

The three drives pattern reflects the psychology of the market participants. The corrective second drive makes traders question the sustainability of the trend. The third and final drive fakes a breakout, trapping bulls or bears who have tried to trade the reversal. The psychology is that after a steep drop, short sellers take profits driving a normal pullback and consolidation. Decreasing volume and volatility reflect a stabilizing period where supply and demand momentarily balance out. The triangular shape shows indecision as both bulls and bears hesitate during the pause.

Is a Triple Top Pattern Reliable?

1. The middle line of the channel also provides trading opportunities on lower time frames.
2. By placing the stop loss within the pattern, instead of above it (triple top) or below it (triple bottom) improves the reward relative to the risk.
3. This imbalance leads to sideways and downward arc price action as buyers and sellers struggle to take control.
4. A triple bottom pattern has a 65% likelihood of forming completely.
5. These patterns often provide insights into short-term price movements and sentiment shifts.

When a pullback ends, the price rallies and gradually forms three consecutive peaks, looking like a channel. Similarly, the degree to which price fluctuates within a price pattern can be useful in analyzing the validity of a price pattern, as well as in predicting the magnitude of the eventual price breakout. Patterns showing larger degrees of volatility are likely to result in more significant price moves once price breaks out of the pattern. The right place to place a stop loss for a triple top pattern is above the high of the third peak.

For example, if the pattern’s swing high price is $40 and the pattern’s support level is $30, the distance between the swing high and the support level is $10. The $10 is subtracted from the breakout point of $30 to get a profit target exit of $20 in this example. This method of calculating the height helps traders determine and understand the estimated downside of a price movement and easily identify an estimated target.

Each peak represents a point where the market has reached a resistance level and failed to break through. The pattern provides a downside target equal to the height of the pattern subtracted from the breakout point. Sometimes the price will drop much lower than the target, other times it won’t reach the target.

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. The flipping psychology is encapsulated in the triple top alternating between hope-fueled peaks and discouraged sell-offs. Once the third peak forms, sellers take decisive control as buyers become unwilling to chase new heights.

A double bottom occurs when the price is dropping, then the price rallies briefly (the pullback), and then moves back to the prior low. For example, before the third high forms, the pattern may look like a Double Top. The appearance of the Triple Top indicates the existence of an uptrend, which is currently in the process of reversing into a downtrend. The difference is that all three highs of the Triple Top will be around the same height, while in the Head and Shoulders pattern, the second high is higher than the first and third high. The highs do not all have to exactly the same level but should be “close enough”.

If the price can’t rise above resistance there is limited profit potential in holding onto it. As the price falls below the swing lows of the pattern, selling may escalate as former buyers exit losing long positions and new traders jump into short positions. This is the psychology of the pattern, and what helps fuel the selloff after the pattern completes. The triple top is a type of chart pattern used in technical analysis to predict the reversal in the movement of an asset’s price.

The three drives pattern refers to a price chart that shows three successive drives or impulses in the same direction, with each impulse typically being contained within the range of the preceding one. The three peaks will be distinct and at approximately the same price level, with some minor variation. The valleys between the peaks tend to be roughly at the same level as well. Visually it takes on the shape of an “M” or “W” with three crests of almost equal height, as in the image below.

Firstly, it shows a triple bottom pattern, which is a bullish reversal pattern indicating potential support and a possible trend change. Following this, there’s a break of swing lows, suggesting a possibility of trend reversal towards the upside. The main benefit of chart patterns is that they provide a visual representation of past price action, which offers insight into potential future price movement. Chart patterns allow traders to quickly identify key support and resistance levels as well as trends and ranges.