Trading Triple Tops and Bottoms with Breakout Levels and Price Targets
Summary
The document explains triple tops as potential bearish reversals after three peaks near the same price area, and triple bottoms as potential bullish reversals after three tests of support. A pattern is considered complete when price breaks beyond the latest pullback level or a trendline connecting the pullbacks. The examples illustrate these entry signals, while the proposed price targets project the pattern’s height from the breakout point.
For risk control, it suggests placing stops beyond the latest peak or trough, or closer to a swing point within the pattern. The discussion notes that patterns can fail, that repeated tests beyond three may indicate a range, and that stop distance and target size can produce an unattractive reward-to-risk profile. It also observes that triple patterns can resemble head-and-shoulders formations and that alternative breakout levels can imply different targets. These are chart-reading guidelines, not evidence of a tested or consistently profitable strategy.
Key ideas
- A triple top may signal a reversal after price breaks below the latest pullback low or its connecting trendline.
- A triple bottom may signal a reversal after price breaks above the latest pullback high or its connecting trendline.
- Project the pattern height from the breakout level to estimate a possible price target.
- Stops beyond the latest extreme can limit losses, while stops within the pattern can reduce risk at the cost of greater sensitivity to price movement.
- The patterns can fail, and repeated tests of the same area may indicate range-bound trading.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.