Triple Top or Triple Bottom
Triple tops (or bottoms) are identified by three peaks (or troughs) of similar height.
Targets are measured in a similar fashion to Double Tops and Double Bottoms and they are traded in the same manner.
Volume Confirmation
For a triple top, volume is high on the first peak and low on the third. There is an increase in volume on the second trough and a sharp increase at the breakout.
A triple bottom requires high volume on the first trough reducing to low volume on the third. Volume increases on the second peak and again on the breakout.
Trading Signals
Triple Top:
Go short on a break below the support line.
Place a stop-loss just above the last peak.
Price often rallies back to the support line which then acts as a resistance level. Go short on a reversal signal and place a stop-loss just above the resistance level.
Triple Bottom:
Go long on a break above the resistance line.
Place a stop-loss just below the last trough.
Price often corrects back to the resistance line which then acts as a support level. Go short on a reversal signal and place a stop-loss just below the support level.
Author: Colin Twiggs is a former investment banker with over 30 years experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary newsletter.
Colin also writes The Patient Investor newsletter which focuses on the global economic outlook and key macro trends.
In addition, he founded PVT Capital (AFSL No. 546090) which offers investment strategy and advice to wholesale clients.