bearish stock market technical analysis charts reversal pattern that is
found
at market tops.
Stock chart patterns recognition
A Triple Top
is one of the most reliable stock
chart
patterns found in technical analysis
charts. It
is a straight
forward
formation defined by three clear peaks in the market at about the same
price levels. It is a variation of the Head
and Shoulders
pattern
except that the three peaks all top around the same price level in a
similar way to the double
top.
The first peak in a triple
top chart pattern is created when the prices fall back in
a consolidation
following a clear trending
phase in the market. Prices then rise again
to a around the level of the first peak but buyers fail to gain enough
momentum to push prices up through the resistance. The third peak is
created in exactly the same way.
Prices can fall
slightly short or slightly exceed the previous highs but as long as
they all
top at around the same price levels it is quite normal. Either way,
each peak
should be on decreasing volume.
As prices fall back again sellers gain control and volume increases.
The Triple Top is created when prices break down through the level of
the previous consolidation
lows and this should be broken on high
volume.
Backtest
A normal market will usually come back up to backtest the validity of
the break down through the support
level. This should be on much lower volume but
on rare occasions, it may not do a backtest if the market is
very
weak.
Volume Confirmation
2nd peak - decreasing volume
3rd peak - decreasing volume
Subsequent decline - high volume
Break - high volume
Backtest - low volume
Targets
A valid triple top
pattern produces a measured move so we can
find a price target by calculating the vertical height of the
consolidation zone, and
then measuring an equal distance below.
Stops
A triple top pattern
fails and is not valid if prices break back above
the highs
before hitting its price
target. If prices are accepted back into the
topping zone once it has broken down through support, it severely
weakens the odds that it is a valid Triple Top chart pattern.
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