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Triple Top Patterns

How to Trade a Triple Top Pattern

6 min read

A triple top pattern is a bearish pattern. It consists of three peaks or resistance levels. Next, the first peak level is formed, the price decreases quickly or gradually. After that, the price returns to the first peak level, failing that first resistance level, thus creating a double top. After the failure and pullback, the price moves back up to the first and second resistance levels and fails, thus creating a triple top. Look for the price to stay below the resistance levels to confirm a bearish continuation. 

A triple top pattern consists of several candlesticks that form three peaks or resistance levels that are either equal or near equal height. Typically, when the third peak forms, it cannot break above the first two peaks and causes a triple-top failure.

These patterns are bearish reversal patterns found on stock charts. Triple tops signal a reversal at the end of a long-term uptrend.

Triple top patterns are similar looking to head and shoulders patterns. While they look similar, the peaks are more equal on a triple top, making the formation different.

The middle peak is equal to the left and right peaks instead of being higher than the two.

Triple Top Patterns

This is an example of triple tops. There’s a double top pattern inside. Traders take a short position once the bearish candlestick fails angular support. They stop at the top of the third peak or the bullish candlestick in the picture. You’ll notice that this could look like a bigger bear flag pattern.

Basics

The triple top pattern is also similar to the double top pattern. The difference is that the triple top does not have the bearish volume, so the bulls can come in once more to try and break the highs.

Triple top patterns have three highs, hence the name triple top. Each high should be equal, have good space, and mark clear turning points, establishing resistance.

Highs do not have to be exact, but they should be pretty close. Otherwise, it could turn into a different pattern. The three tops establish an important resistance level. Traders pay close attention to these levels. If a stock makes three equal highs and does not break, it is a good idea not to try and go long.

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Volume

Volume is always important when trading. It is what drives price. When the triple top pattern is forming, volume usually decreases.

Volume can increase when the stock is trading at the highs. Lower volume during the peaks indicates the bulls are losing momentum. Bears gain the upper hand at the end of the third peak.

After the third high, the volume increases as the sellers/shorts come in and drive the price back down. That increase in volume drives prices right through support. This reinforces the soundness of the pattern.

Triple Top Patterns Trading Strategy

  • Watch for the rise of 1st peak.
  • Next, watch for the price to pullback either quickly or slowly
  • Then, watch for price action to rise again to the previous peak area
  • Next, watch for the price to pullback either quickly or slowly, rejecting at 1st peak
  • Watch for the price to rise again to the previous two peak levels
  • Traders take a short once the price breaks the neckline of the top three peaks
  • Place stop at the top of the highest peak
  • Some traders take a short position once 3rd peak rejects at 2nd peak
  • Place stop at the top of the highest peak

Triple Top Pattern Example

Triple Top Pattern Example

This is an example of a triple top pattern on a daily chart of $XOM. You’ll notice that the pattern took a while to form, so if you waited, you could miss a lot of trade entries. The triple top formation caused a cup and handle failure, which became a falling wedge. The bearish harami pattern was the warning sign, which turned into an evening star pattern to confirm the reversal. This pattern took place at the top of a rising wedge pattern.

Triple Top Fakeout Pattern

Triple Top Fakeout Pattern

This is an example of a triple-top failure on a daily chart of $CVX. The pattern was set up nicely, but then there was a fakeout that went to the bullish side. You’ll notice that it turned into a triple bottom. This is why it’s important to confirm the different pattern formations.

Final Thoughts

As with all other reversal patterns, triple-top patterns are only competing once support is broken; the lowest point of the pattern is considered support.

The downtrend begins once this level is broken, and support is now resistance. Traders may test that resistance level to see how strong it is. This can allow for another good short position.

Triple Tops can be found on every time frame from intraday to months. It will often take a few months to form and are great reversal patterns for swing trading. The inability to break the resistance level can allow for an opportunity to short while looking to trade the bearish options strategies.

Frequently Asked Questions

A triple top is a bearish reversal pattern. They happen at the top of bullish uptrends when the price can't break above the two previous resistance levels.

The triple top pattern is a reliable reversal pattern but not 100%. There will often be fake outs, and prices will break out and go bullish. This is why risk management is important.

The pattern of a triple top formation is bearish. It consists of three peak levels that are close to equal. It signals that the bears are in control.

A double top consists of two peak levels, and a triple top consists of three peak levels. They are both bearish reversal patterns.

A triple top is good for the bears and bad for the bulls. This pattern signals that resistance on the security can't be broken and the bears are in control.

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