Triple top and triple bottom patterns are powerful reversal formations that occur when price tests a key level three times without breaking through. These patterns signal exhaustion in the current trend and potential reversal. In this comprehensive guide, we will cover both patterns, their similarities, differences, and how to trade them effectively.
Understanding Triple Patterns
Both triple top and triple bottom patterns belong to the family of reversal patterns. They form when price repeatedly tests a level but fails to break through, eventually reversing direction.
Core concept: When price tests a level three times and fails, it demonstrates that this level has significant importance. The market is telling you that the trend has lost momentum and a reversal may be imminent.
Triple Top Pattern Overview
The triple top is a bearish reversal pattern that forms at market tops.
Characteristics
- Forms after an uptrend
- Three peaks at approximately the same resistance level
- Two troughs forming the neckline support
- Confirmed when price breaks below the neckline
- Volume typically decreases on each successive peak
Triple Top Example
Stock ABC rallies to $100, pulls back to $90, rallies to $99.50, pulls back to $91, rallies to $100.20, then breaks down below $90. This forms a triple top with three failed attempts to sustain prices above $100.
Triple Bottom Pattern Overview
The triple bottom is a bullish reversal pattern that forms at market bottoms.
Characteristics
- Forms after a downtrend
- Three troughs at approximately the same support level
- Two peaks forming the neckline resistance
- Confirmed when price breaks above the neckline
- Volume typically decreases on each successive bottom
Triple Bottom Example
Stock XYZ declines to $50, bounces to $58, declines to $50.50, bounces to $57, declines to $49.80, then breaks out above $58. This forms a triple bottom with three failed attempts to push prices below $50.
Comparing Triple Top and Triple Bottom
Similarities
- Both are reversal patterns
- Both require three tests of a key level
- Both need a neckline break for confirmation
- Both use the same target calculation method
- Both show decreasing volume on successive tests
Differences
- Trend context: Triple top forms after uptrend, triple bottom after downtrend
- Bias: Triple top is bearish, triple bottom is bullish
- Psychology: Triple top shows buyer exhaustion, triple bottom shows seller exhaustion
- Breakdown vs breakout: Triple top breaks down, triple bottom breaks up
How to Trade Both Patterns
Trading Triple Tops
Triple Top Trade Setup
- Entry: Short on breakdown below neckline
- Stop loss: Above the highest peak
- Target: Pattern height projected below neckline
- Alternative: Short on retest of broken neckline
Trading Triple Bottoms
Triple Bottom Trade Setup
- Entry: Long on breakout above neckline
- Stop loss: Below the lowest trough
- Target: Pattern height projected above neckline
- Alternative: Long on pullback to broken neckline
Price Target Calculation
Both patterns use the same measured move technique:
- Measure the vertical distance between the peaks/troughs and the neckline
- Project this distance from the neckline in the breakout direction
Triple Top Target
Peaks at $80, neckline at $72, height = $8. Target = $72 - $8 = $64
Triple Bottom Target
Troughs at $40, neckline at $48, height = $8. Target = $48 + $8 = $56
Volume Analysis
Volume provides crucial confirmation for both patterns:
Triple Top Volume
- First peak: Highest volume (enthusiasm still high)
- Second peak: Lower volume (momentum fading)
- Third peak: Lowest volume (buyer exhaustion)
- Breakdown: Volume spike (confirms the reversal)
Triple Bottom Volume
- First bottom: Highest volume (panic selling)
- Second bottom: Lower volume (selling pressure fading)
- Third bottom: Lowest volume (seller exhaustion)
- Breakout: Volume spike (confirms the reversal)
Common Characteristics of Valid Patterns
- Clear prior trend: Must have a trend to reverse
- Equal levels: Peaks/troughs should be at similar prices
- Proper spacing: Peaks/troughs should be reasonably spaced apart
- Volume pattern: Decreasing volume on tests, increasing on break
- Clean neckline: Should be relatively horizontal
Triple vs Double Patterns
Triple patterns are essentially double patterns with an additional test:
- Reliability: Triple patterns are often more reliable due to the extra confirmation
- Time: Triple patterns take longer to form
- Exhaustion: Three failed attempts show stronger exhaustion
- Rarity: Triple patterns are less common than doubles
Trading insight: If you are waiting for a double top/bottom to confirm and price returns to test the level a third time without breaking through, the pattern becomes even more significant.
Common Mistakes to Avoid
- Unequal tests: All three peaks/troughs should be at similar levels
- Premature entry: Wait for neckline confirmation
- Ignoring context: Ensure there is a prior trend to reverse
- Skipping volume analysis: Always check volume patterns
- Tight stops: Give trades room to breathe
- Forcing patterns: Not every consolidation is a triple pattern
Real-World Application
Complete Triple Bottom Trade
Stock DEF shows the following pattern:
- Prior downtrend from $70 to $45
- Bottom 1: $45.00 with high volume
- Peak 1: $52.00
- Bottom 2: $45.50 with lower volume
- Peak 2: $51.50
- Bottom 3: $45.20 with lowest volume
- Breakout above $52 with volume spike
Trade: Long at $52.50, stop at $44, target $59 (height $7 added to $52)
Risk: $8.50 | Reward: $6.50 | R:R: 0.76:1
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Summary
Triple top and triple bottom patterns are reliable reversal signals that form when price tests a level three times without breaking through. Look for three equal tests with decreasing volume, wait for neckline confirmation, and use the measured move for targets. Whether you are trading a bullish triple bottom or a bearish triple top, the key is patience, confirmation, and proper risk management.
Want to dive deeper into each pattern? Check out our dedicated guides on the triple top pattern and triple bottom pattern.