The triple top is a bearish reversal pattern that forms after a prolonged uptrend. When price tests the same resistance level three times and fails to break higher, it signals that buyers are exhausted and sellers are ready to take control. In this guide, we will cover how to identify and trade the triple top pattern effectively.
What is a Triple Top Pattern?
A triple top pattern forms when price creates three distinct highs at approximately the same price level, with two moderate troughs (reactions) in between. The pattern is confirmed when price breaks below the support level formed by the troughs.
Key insight: The triple top represents three failed attempts by buyers to push price higher. Each failure at resistance demonstrates increasing selling pressure and sets up a potential trend reversal to the downside.
How to Identify a Triple Top
To properly identify a triple top pattern, look for these characteristics:
- Prior uptrend: The pattern must form after a significant rally
- Three highs: Three distinct peaks at roughly the same level
- Two troughs: Two reaction declines between the peaks
- Neckline: Horizontal support connecting the two troughs
- Time spacing: The peaks should be relatively evenly spaced
- Volume: Volume typically decreases on each successive peak
Pattern Psychology
Understanding the psychology helps you trade the pattern with confidence:
First Peak
After an uptrend, price meets resistance and pulls back. This could just be a normal retracement, so traders are not yet convinced of a reversal.
Second Peak
Price returns to test the resistance level and fails again. This gets the attention of traders who start watching for a potential double top.
Third Peak
When price returns to resistance a third time and fails, it confirms strong selling interest at that level. Buyers are clearly unable to push price higher.
Breakdown
When price breaks below the neckline, it triggers selling from pattern traders and stop losses from longs, creating momentum for the reversal.
How to Trade the Triple Top
Entry Strategy 1: Breakdown Entry
Enter short when price breaks below the neckline with volume confirmation.
Breakdown Entry Setup
- Wait for a close below the neckline
- Confirm with increased volume on breakdown
- Enter short on the breakdown candle close or next open
- Stop loss above the most recent peak
Entry Strategy 2: Retest Entry
Wait for the breakdown, then enter on a retest of the neckline (now resistance).
Retest Entry Setup
- Confirm the breakdown below the neckline
- Wait for price to rally back to the neckline area
- Enter short when price rejects the neckline as resistance
- Tighter stop loss just above the neckline
Entry Strategy 3: Third Peak Entry
Aggressive traders may enter short at the third peak with a tight stop above resistance.
Third Peak Entry Setup
- Identify two previous peaks at the same level
- Enter short when price touches resistance for the third time
- Look for bearish candlestick confirmation
- Stop loss just above the resistance level
Note: This is a higher risk entry as the pattern is not yet confirmed.
Price Target Calculation
Calculate your price target using the measured move technique:
- Measure the height from the peaks to the neckline
- Subtract this distance from the neckline breakdown level
Target Calculation Example
- Triple top level: $60.00
- Neckline: $52.00
- Pattern height: $8.00
- Price target: $52 - $8 = $44.00
Complete Trading Example
Triple Top Trade on Stock ABC
Stock ABC forms a triple top over 3 months:
- Peak 1: $75.00 in week 1
- Trough 1: $68.00 in week 3
- Peak 2: $74.80 in week 5
- Trough 2: $68.50 in week 7
- Peak 3: $74.90 in week 9
- Neckline: $68.00
Trade execution:
- Breakdown occurs at $67.75 with volume
- Entry: Short at $67.50
- Stop loss: $75.50 (above the peaks)
- Target: $61.00 (pattern height subtracted from neckline)
Risk: $8.00 | Reward: $6.50 | R:R: 0.81:1
Alternative with retest entry at $68.00: Risk $7.50, Reward $7.00, R:R 0.93:1
Volume Confirmation
Volume provides important confirmation for triple top patterns:
- First peak: Usually has the highest volume
- Second and third peaks: Volume typically decreases
- On breakdown: Volume should spike significantly
- Post-breakdown: Sustained selling volume supports the reversal
Common Mistakes to Avoid
- Unequal peaks: The three highs should be at similar price levels
- Entering before confirmation: Wait for the neckline breakdown
- Ignoring volume: Always confirm with volume analysis
- No prior uptrend: The pattern needs context to be a reversal
- Stop loss too tight: Allow room for normal price fluctuation
Pro tip: Triple tops are more reliable when they form at historically significant resistance levels or round number prices. The more context confirming resistance, the stronger the pattern.
Track Your Pattern Trades
Pro Trader Dashboard helps you log and analyze all your chart pattern trades. See which patterns work best for your trading style.
Summary
The triple top is a reliable bearish reversal pattern that forms when buyers fail three times to push price above resistance. Look for three peaks at similar levels with decreasing volume, wait for a breakdown below the neckline with volume confirmation, and use the measured move technique for your price target. With proper risk management, this pattern can offer excellent reversal trading opportunities.
Want to learn the bullish counterpart? Check out our guide on the triple bottom pattern or explore both patterns together.