Table of Contents
What Is a Triple Top?
Let me explain what a triple top is—it's a chart pattern in technical analysis that predicts a reversal in an asset's price movement. You see three peaks, and this signals that the asset might stop rallying and head toward lower prices.
For it to qualify as a triple top, it has to follow an uptrend. The opposite is a triple bottom, which means the price isn't falling anymore and could go higher.
Key Takeaways
- A triple top forms from three peaks in the same area, with pullbacks between them.
- It's complete when the price drops below pattern support, indicating further decline.
- Traders exit long positions or enter shorts at completion.
- Place a stop loss above resistance peaks for protection.
- The downside target is the pattern height subtracted from the breakout point.
How a Triple Top Works
The pattern happens when an asset's price hits three peaks at almost the same level. That peak area is resistance, and the pullbacks are swing lows. Once the price falls below those swing lows after the third peak, the pattern completes, and you should expect a move down.
It looks like a head and shoulders pattern, but here the middle peak is about equal to the others, not higher. It's also like a double top, which has just two highs before dropping.
Significance of the Triple Top
Technically, this pattern shows the price can't break through the peaks. In real terms, it means after several tries, there aren't enough buyers at that level.
As the price drops, buyers from the pattern start selling to cut losses. When it breaks below swing lows, selling ramps up as longs exit and shorts enter. That's the psychology driving the selloff.
Patterns don't always work—sometimes it completes but then the price recovers and goes above resistance. To protect yourself, place a stop loss above the latest peak or a recent high in the pattern if you're short.
Trading Triple Top Patterns
You might enter a short or exit longs when the price breaks below support—the recent swing low after the second peak, or a trendline connecting the lows. Expect a further drop from there.
Look for heavy volume on the break to confirm—strong selling interest. Without it, the pattern might fail.
The downside target is the pattern height subtracted from the breakout. It's an estimate; sometimes it goes lower, sometimes not.
Combine with other indicators, like a bearish MACD crossover after the third peak or RSI leaving overbought, to confirm.
Real-World Example of a Triple Top
Take Bruker Corp. (BRKR)—the price hit near $36.50 three times, pulling back each time, forming the pattern. It broke below $34 trendline support on rising volume and kept declining.
You could short or exit longs at $34, with a stop loss above resistance. The target was $30.75 (pattern height $3.25 subtracted from $34), which it hit before bouncing.
Special Considerations for a Triple Top
A drawback is the risk/reward ratio—stop loss and target based on pattern height make them equal, which isn't ideal. Place the stop inside the pattern to improve it, risking less while targeting the full height.
Depending on entry—trendline or pullback low—you get different targets. Pick what suits to maximize profit.
Is a Triple Top Bullish or Bearish?
It's bearish, reversing to a downtrend. Triple bottom is bullish, reversing to an uptrend.
Are Triple Tops Rare?
Yes, rarer than double tops since they need an extra peak, which is also their weakness.
How Long Does the Triple Top Pattern Take to Form?
Usually three to six months, like other major reversals.
The Bottom Line
The triple top predicts a price reversal—peak, retrace, rally to similar peak, retrace, rally again, then decline. It completes below support, shifting the trend down, so exit longs or enter shorts. Triple bottom is the inverse, ending a downtrend.
Other articles for you
A wash in investing refers to transactions that net zero gain, with complex tax rules especially for claiming losses on repurchased securities.
The Overseas Private Investment Corporation (OPIC) was a U.S
The Howey Test determines if transactions are investment contracts under U.S
Average inventory is a method to estimate the value or quantity of goods held over specified periods for better business management.
The dividend payout ratio measures the portion of a company's earnings distributed as dividends to shareholders.
The GARCH process is an econometric model for estimating volatility in financial markets, providing a realistic approach to predict asset prices and rates.
A non-issuer transaction is a securities trade that doesn't involve the issuer and is often exempt from SEC registration.
Exempt income refers to earnings not subject to federal or state income taxes under specific conditions.
This text explains the structure, operations, fees, benefits, and drawbacks of homeowners associations (HOAs) in managing community properties.
Repackaging in private equity involves buying a struggling public company, taking it private, revamping it, and reselling for profit.