Triple Bottom Patterns
Triple bottom patterns are a bullish pattern. It consists of three valleys or support levels. After the first valley is formed, price goes up either quickly or gradually. After that, price moves back down to the first valley level and it holds that first support level, thus creating a double bottom. After that, price moves up then pulls back down to the first and second support level and holds, thus creating triple bottom. Look for price to hold support areas and continue up to confirm bullish continuation.
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What Are Triple Bottom Patterns?
A triple bottom pattern consists of several candlesticks that form three valleys or support levels that are either equal or near equal height. Typically when the third valley forms, it can’t hold support above the first two valleys and causes a triple bottom breakout.
In order for triple bottom patterns to form, a strong trend needs to be in place. The triple bottom typically forms in a long bearish downturn with plenty of price structure. What I mean by that is an over-arching pattern will form.
Bears have been in control of the trend but the bulls are starting to come back in, at a key support level for the time frame you are trading. You may see a triple bottom while in an uptrend before continuing higher.
In order for a triple bottom pattern to form, it needs three lows. The first bottom could just be simple price action movement. The first low forms and there’s not much thought about it. The second bottom is signaling that the bulls are gaining momentum. A possible reversal is on it’s way.
Next, the last bottom forms. This indicated a strong support level is in place. When the bears see that they’ve hit a low 3 times and haven’t been able to push price lower, they give into the bulls as price breaks resistance.
The lows should be equal in price each time although that may not always be the case. If it’s not equal it needs to be pretty close to it. It also needs to be well spaced as well as have significant turning points.
How to Trade Triple Bottom Patterns
- Watch for the fall of 1st valley
- Next, watch for price to move up either quickly or slowly, building a support
- Then, watch for price action to fall again to the newly formed support area
- Next, watch for price to move up either quickly or slowly again
- Watch for price to fall again to previous two support levels
- Traders take a long once price breaks above the neckline of top three valleys
- Some traders will buy at the bottom of this support area, getting an even better entry
- Place order either near the bottom support or as the price breaks out of the pattern after the triple bottom has formed
- Set your stops and have your profit targets
For 3 bottom patterns to be complete, there needs to be a breakout of resistance. You can see in the charts posted above that once the resistance level was broken the stock moved up. Once the resistance level is broken, it now becomes support.
The stock may head back down to test support and make sure it holds. You’ll notice in the charts above that the new support level was obeyed even weeks or months down the lines.