Triple Top and Triple Bottom Patterns

Triple Top and Triple Bottom formations are important chart patterns used in technical analysis. Both patterns provide signals that the market is struggling to move in a certain direction and that a trend reversal may be imminent.

These patterns reflect repeated price movements at certain levels. After these levels are broken, a strong new move in the market is expected.

You can explore our article to learn more about Triple Top and Triple Bottom patterns.

What is the Triple Top Pattern?

The Triple Top pattern is a technical analysis model that indicates the potential end of an uptrend when prices reach the same level three times without surpassing it, followed by a pullback. The pattern is often considered a strong signal that a downtrend may begin.

During the formation of this pattern, prices rise to a peak and then pull back. They rise again to a similar level, forming a second and third peak, but fail to exceed the first peak each time. The pattern is completed when prices break below the lowest level between the three peaks.

Example of the Triple Top Pattern

The Triple Top formation is a chart pattern where the price of an asset reaches nearly the same level three times and then shows a bearish trend. This formation indicates a resistance level that the asset's price encounters when it reaches the peak points. When the price falls below the swing low levels after the third peak, the formation is considered complete, and the price is expected to continue declining.

Let's understand this with an example using the XAU/USD pair. Assume that the gold price initially rises to $1980 and then falls back to $1920. Later, the price rises again to $1975 and then drops to $1925. Finally, assume the price rises to $1970 for the third time and then returns to the $1925 level.

In this scenario, the gold price approaches the $1970-$1980 level three times, then pulls back, and after the third peak, it falls below the $1925 level, completing the Triple Top formation. This situation signals that the price may continue to decline.

We can observe a similar situation in the chart below:

• The chart shows a clear resistance level highlighted in gray. The price touches this level three times and then pulls back.
• The price first reaches the resistance level and then pulls back. This can be considered the first peak, marking the beginning of the formation.
• The price reaches the resistance level again but fails to break through, pulling back once more. This forms the second peak of the formation.
• On the third attempt, the price again reaches the resistance level but fails to break it and pulls back. With the third peak, the formation is complete.
• After the third peak, the price drops sharply, confirming that the formation is complete.

What is the Triple Bottom Pattern?

A triple bottom pattern is a type of chart formation in which an asset's price falls to almost the same level three times before showing signs of a positive trend. This pattern suggests that the asset has a support level and that the market is likely to rebound from it if the price is unable to break through it.

The formation has been considered complete and further price increases are anticipated if the price begins to rise following the third bottom. Usually, this formation denotes the end of a downward trend and shows that buyers are becoming more powerful in the market.

Example of the Triple Bottom Pattern

The Triple Bottom pattern is a chart formation where the price of an asset drops to a specific support level three times, recovers each time, and then enters a bullish trend.

To better understand this, let's consider an example using the EUR/USD pair. Assume that during the first bottom, the pair falls to the 1.0800 level and then recovers to 1.0900. In the second bottom, the same low level is tested again, but this time the recovery occurs at 1.0875. In the third bottom, the price drops to 1.0800 and then rises to 1.0880.

In this scenario, the EUR/USD pair has dropped to the 1.0800 support level three times, recovering each time. The price starting to rise after the third bottom indicates that the Triple Bottom pattern has been completed, suggesting that the price may rise further.

You can observe a similar scenario in the chart below:

• The chart shows a clear support level highlighted in gray. The price has dropped to this level three times and recovered each time.
• The price first falls to the support level (gray area) and then recovers, starting to rise. This marks the beginning of the pattern.
• In the second bottom, the price falls to the support level again but fails to break it, leading to another recovery.
• In the third bottom, the price drops to the same support level once more. The support level holds again, and the price starts to recover.
• After the third bottom, the price begins to rise. This indicates that the Triple Bottom pattern has been completed and that the price is likely to trend upwards.
• The fact that the price touches the same support level three times indicates that this level is a strong support and that the market finds buyers at this level. The inability to break the support level suggests that the market is gaining strength from this level and may enter an upward trend.

How to Identify Triple Top or Bottom Formation on a Chart?

Advantages of Triple Top & Triple Bottom

• Both formations provide reliable signals for trend reversals. The Triple Top formation indicates the end of an uptrend and the potential beginning of a downtrend, while the Triple Bottom formation suggests the end of a downtrend and the potential start of an uptrend.
• Both formations are relatively easy to identify on charts.
• They provide strategic entry and exit points for investors.
• Both the Triple Top and Triple Bottom formations are applicable to many financial assets and timeframes.
• They offer stronger signals when used in conjunction with other technical analysis tools.

Limitations of Triple Top & Triple Bottom

• Both formations can occasionally provide false signals.
• Prices may not always clearly form a Triple Top or Triple Bottom pattern. Market fluctuations and noise can make it difficult to identify the formation.
• They may provide late confirmation of a trend reversal. Waiting for the formation to complete can cause traders to miss out on part of the potential gains.
• Relying solely on these formations to make decisions can be risky and may lead to misleading outcomes.
• Triple Top and Triple Bottom formations do not provide certainty in predicting price targets. This can make it challenging for investors to develop a clear strategy for taking profits at specific levels.

FAQs on Triple Top and Bottom

What is the difference between a triple top & bottom and double top & bottom?

Triple Top and Triple Bottom formations are patterns where the price touches a certain level three times before pulling back. In Double Top and Double Bottom formations, the price only touches this level twice. Triple Top and Triple Bottom formations are generally considered more reliable because they involve more tested levels, but they take longer to form.

Are triple tops & bottoms rare?

Triple Top and Triple Bottom formations are rarer compared to Double Top and Double Bottom formations. This is because it's less common for the price to test a specific support or resistance level three times. However, when these formations do appear, they typically provide stronger trend reversal signals.

What are the differences between Triple Top and Triple Bottom formations?

The Triple Top formation occurs when the price reaches a certain resistance level three times and pulls back each time. This formation usually indicates the end of an uptrend and the potential start of a downtrend. The Triple Bottom formation, on the other hand, happens when the price falls to a certain support level three times and recovers each time. This formation signals the end of a downtrend and the beginning of an uptrend.

How is a Triple Top formation identified?

To identify a Triple Top formation, you should observe the price reaching a specific resistance level three times and pulling back each time. Each peak should be at roughly the same level. The formation is completed when the price falls below the previous low after the third peak.

How is a Triple Bottom formation identified?

To identify a Triple Bottom formation, you should observe the price dropping to a specific support level three times and recovering each time. Each trough should be at roughly the same level. The formation is completed when the price starts to rise after the third trough.

Are Triple Top & Bottom formations reliable?

Triple Top and Triple Bottom formations provide reliable trend reversal signals. These formations show that the price has tested a certain level three times without breaking it, which indicates that the market might change direction. However, as with any technical analysis tool, these formations can occasionally give false signals; therefore, it's recommended to use them in conjunction with other analysis tools.

How does the Triple Top formation compare with other trend reversal formations?

The Triple Top formation is similar to the head and shoulders pattern, but the middle peak is not higher than the other peaks. The Triple Top usually indicates a stronger resistance level because the price tests this level three times without breaking it. It can provide a stronger trend reversal signal than the head and shoulders formation.

How does the Triple Bottom formation compare with other trend reversal formations?

The Triple Bottom formation is similar to the Double Bottom formation, but the price tests the support level three times. This indicates a stronger support level and, therefore, can provide a stronger signal of a trend reversal. The Triple Bottom formation is considered a very reliable bullish signal, especially when it appears after a significant downtrend.