Triple Top

The triple top is a bearish pattern with an MN shape. Three bottoms will come in succession, reflecting an important resistance. This marks a reversal will.

Below the triple top shows the area of resistance that will lead to a correction of the price three times. The neckline pattern will be formed by the lowest of these two bearish peaks. An initial correction will then occur and, then the price will go back on resistance. The magnitude of these three tops are normally the identical (as in the case below), but it may happen that the first top may be lower than the next two tops. This composition strengthens the validity of the pattern since it reflects a breathlessness of buyers. If the second top is higher than the two others, it could be a head and shoulders pattern.

Another correction will take place, theoretically on the same level as the first correction. Provided that the neckline is broken at this point, then it can be a double top. In many instances we know afterward what type of pattern we will face. A return on the resistance must be done. If the third top were higher than the first two, then that would reinforce the chances of reversals (breathlessness of buyers). The third correction that will lead to the breakout of the neckline and will validate the bearish reversal.

Once this neckline is broken, it could happen that the price will take resistance on it (that line becomes a resistance, called a pullback), then the price will take up its bearish movement. A target price will be determined by the gap between the resistance and the neckline.

Another example of a triple top with a breathlessness of buyers (top are less and less high) is provided.

Following are are several statistics about the triple top:

– In 85% of cases, there is a downward exit.
– In 50% of cases, the target of the pattern is reached once the neckline is broken.
– In 84% of cases, a pullback will occur.
– In 85% of cases, there is a pursuit of the movement once the neckline is broken.

In case of pullback, the downward movement may not be as important once the target of the pattern is reached.

If the resistance is overly tested prior to a correction (flat top), then the decrease following the breaking of the neckline will be more important.

The more the three tops are close, the more of the percentage of success of the pattern is high.

The more the movements between the neckline and resistance are straight, the more the pattern is efficient.

The more the bullish movement proceeds the formation of the triple top is big, the more the downward movement at the breakout of the neckline will be strong.

The pattern is more efficient if the third top is not as high as the other two.