Triple Top
Candlefocus EditorThe triple top formation is created when price hits resistance in the same area three times. The three peaks of the triple top are usually separated by moderate to significant pullbacks. Because the price has trouble breaking through the same resistance level multiple times, traders tend to pay more attention to this reversal pattern than other patterns.
Once the price moves below the support of the triple top pattern, it is considered to be complete and implies further price decline. A trader would enter short positions when the pattern is completely formed, or exit long positions. To ensure a safe trade, it is preferable to place a stop loss just above the resistance level, which is the point of the three peaks.
The potential target estimate of the triple top pattern can be found by subtracting the height of the pattern from the breakoutpoint. It is difficult to determine the exact target since market behavior is unpredictable and prices can often exceed expectations.
The triple top indicates that the upwards trend may be ending and the market may be heading lower. It is important to respect the pattern and take proper action when trading. For example, traders should remember to use stop loss in order to avoid large losses. Furthermore, traders should also pay attention to volume when observing the triple top pattern. High trading volume at the time of the formation greatly increases the accuracy and predictive power of the pattern. In conclusion, the triple top is a bearish reversal pattern which suggests a potential for further price decline. Knowing the pattern and its target estimate can help traders to make better decisions in the market.