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Reversal Chart Patterns

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Triple Top Reversal Pattern

Triple Top is a pattern very similar to the Double Top -- only there are three distinctive tops rather than two. A triple top formation is a distinct chart pattern characterized by a rally to a new high followed by a moderate pullback and a second rally to test the new high. As the stock rallies to make the second peak (top) sellers overwhelm buyers and the stock price falters again This process is repeated a third time but buyers finally submit, support levels are broken and a massive decline ensues.

The technical target for Triple tops is derived by subtracting the point difference between the top #1 and the reaction low from the breakout level. After the third top has been created, the breakout level is the low created between tops #2 and #3. No triple top formation is complete until the stock falls through this point.


Triple Top

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Throughout the development of the triple top, it can start to resemble a number of patterns. Before the third high forms, the pattern may look like a double top. Three equal highs can also be found in an ascending triangle or rectangle.

  • Prior Trend: An uptrend or long trading range should be in place for Triple Top. Sometimes there will be a definitive uptrend to reverse. Other times the uptrend will fade and become many months of sideways trading.
  • Three Highs: All three highs should be reasonable equivalent to each other, well spaced and mark significant turning points.
  • Volume: As the triple top develops, overall volume levels usually decline. Volume sometimes increases near the highs. After the third high, an expansion of volume on the subsequent decline and at the support break greatly reinforces the soundness of the pattern.
  • Support Break: The Triple Top is not complete until a support break. The lowest point of the formation, which would be the lowest of the intermittent lows, marks this key support level.
  • Support Turns Resistance: Broken support becomes potential resistance, and there is sometimes a test of this newfound resistance level with a subsequent reaction rally.
  • Price Target: The distance from the support break to highs can be measured and subtracted from the support break for a price target. The longer the pattern develops, the more significant is the ultimate break. Triple tops that are 6 or more months old represent major tops and a price target is less likely to be effective.

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