Triple Tops and Bottoms
posted under
Philosophy of Technical Analysis
by ceecabolos

Most of the points covered in the treatment of the head and shoulders pattern are also applicable to other types of reversal patterns. (See Figures 5.4a-c.) The triple top or bottom, which is much rarer in occurrence, is just a slight variation of that pattern. The main difference is that the three peaks or troughs in the triple top or bottom are at about the same level. (See Figure 5.4a.) Chartists often disagree as to whether a reversal pattern is a head and shoulders or a triple top. The argument is academic, because both patterns imply the exact same thing.The volume tends to decline with each successive peak at the top and should increase at the breakdown point. The triple top is not complete until support levels along both of the intervening lows have been broken. Conversely, prices must close through the two intervening peaks at the bottom to complete a triple bottom. (As an alternate strategy, the breaking of the nearest peak or trough can also be used as a reversal signal.) Heavy upside volume on the completion of the bottom is also essential.The measuring implication is also similar to the head and shoulders, and is based on the height of the pattern. Prices will usually move a minimum distance from the breakout point at least equal to the height of the pattern. Once the breakout occurs, a return move to the breakout point is not unusual. Because the triple top or bottom represents only a minor variation of the head and shoulders pattern, we won't say much more about it here
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