What Is A Triple Top Chart Pattern?
In technical analysis, a triple top, also known as a triple top reversal, is a bearish reversal chart pattern that forms on the price charts of financial markets. It consists of 3 swing high levels or 3 peaks and it indicates that the bullish price trend may be ending and that the price action will reverse from bullish action to bearish action.
A triple top pattern forms at the end of a bullish trend or market top. It is completed once the price breaks down below the pattern support level.
The triple top pattern can form in any financial market with historical price data.
Triple Top Pattern Components
In order to identify a tripe top pattern on a price chart, there will need to be four components visible.
The four components of a triple top pattern are:
- A swing high resistance level on the left: This is the first swing high level of the triple top pattern. It forms on the left side of the pattern. It is marked "1" on the price chart above.
- A swing high resistance level in the center: This is the second swing high level of the triple top pattern. It forms in the center of the pattern and it forms in the same swing high price level as the first swing high. It is labeled "2" on the price chart above.
- A swing high resistance level on the right: This is the third swing high level of the triple top pattern. It forms on the right of the pattern and is the same swing high price level as the first and second swing highs. This is the area where a trader will place their stop-loss when trading this pattern. It is labeled "3" on the price chart above.
- A neckline: This is the swing low support level before the price pushes up into the 3 swing high resistance levels. It is labeled "neckline" on the chart above. It is the area where a trader will enter a short position after the price breaks down below the support level.
Drawing a triple top pattern involves including all these four components together.
Triple Top Chart Pattern Examples
Below are visual examples of the triple top chart pattern.
Example Of A Triple Top Pattern In The Stock Market
In the daily price chart of Block, Inc. stock, a triple top pattern formed. After the price breaks down and the pattern completes, it leads to a multi-week steep price decline in the price of the stock.
This is an example of a triple top pattern in the stock market.
Example Of A Triple Top Pattern In The Forex Market
In the daily price chart of the EUR/GBP currency pair, a triple top pattern formed. It resulted in a bearish trend over the following months.
This is an example of a triple top pattern being applied in the forex market.
Example Of A Triple Top Pattern On A Shorter Timeframe Price Chart
In the 3-minute price chart of Tesla stock, a triple top pattern formed. It resulted in a bearish trend and the price slowly moved lower over the next few hours.
Even on a shorter timeframe chart, a triple top pattern can form. Typically day traders and scalpers will use the shorter timeframe charts to trade the triple top patterns.
Example Of A Triple Top Pattern On A Higher Timeframe Price Chart
In the weekly price chart of Expedia stock, a triple top pattern formed. It results in a very fast and rapid price decline over the new few weeks.
This is an example of how a triple top pattern resulted in a price reversal from bullish to bearish even on the higher timeframe price charts.
How To Find Triple Top Patterns
The methods for finding triple top patterns in the markets are:
- Look through price charts manually: A trader can look through the price charts of markets manually and try and find triple tops forming.
- Use a triple top pattern scanner: Use a triple top chart pattern scanner to automatically find triple top patterns in various markets.
- Follow chartists on Twitter: Traders can follow chartists on Twitter and watch for when they post various chart patterns in markets including triple tops.
Triple Top Pattern Benefits
The benefits of triple top patterns are:
- It helps a trader to capture large bearish moves: A triple top pattern can help a trader to capture a large bearish price move in the market when the pattern forms and triggers a short alert.
- It is easy to learn: A triple top only has four components to learn. This means new traders find it easy to learn.
- Traders can use it to take profits on long trades: A trader can use the triple top pattern forming as a signal to take profits on their long positions as it indicates a potential reversal is imminent.
- It can be applied to any market: The triple top pattern can be used in any market and is not restricted to only a few.
Triple Top Pattern Limitations
The limitations of triple top patterns are:
- Stop-loss area can be far from entry price: The stop-loss area for a triple top pattern can be far away from the short entry point meaning there is more risk.
- The pattern can fail: Like any chart pattern, the triple top can fail and stop traders out of their trading positions many times.
- It can sometimes be unclear: The triple top pattern can sometimes be unclear on a price chart. This can sometimes make it hard to find.
Triple Top Formation Duration
The length of time a triple top pattern takes to form will depend on the timeframe of the price chart used.
Example durations for a triple top pattern to form include:
- 60 minutes minimum for a triple top to form on a 1-minute price chart.
- 60 hours minimum for a triple top pattern to form on an hourly price chart.
- 60 days minimum for a triple top pattern to form on a daily price chart.
Frequently Asked Questions About The Triple Top Pattern
Below are frequently asked questions about the triple top chart pattern.
What Type Of Price Charts Can A Triple Top Form On?
A triple top pattern can form on many different types of price charts including:
- Candlestick Charts
- Line Charts
- Point & Figure Charts
- Bar charts
Is A Triple Top Bearish?
Yes, a triple top chart pattern is a bearish reversal pattern that signals that the price of a market may decline much lower.
Is A Triple Top Pattern A Reversal Or A Continuation Pattern?
A triple top pattern is a bearish price reversal pattern and it indicates that the price is reversing from bullish to bearish. It is not a continuation pattern.
What Does A Triple Top Pattern Tell You?
A triple top tells a trader that the bullish trend in a market may be ending and the price may reverse from bullish to bearish price action. It instructs a trader that buying pressure may be ending and new selling pressure may be beginning.
What Price Chart Timeframes Can A Triple Top Pattern Form On?
A triple top can form on any timeframe of price chart from a shorter 1-minute price chart to a higher timeframe weekly or monthly price charts.
What Is The Difference Between A Triple Top And A Triple Bottom Pattern?
The differences between a triple top and a triple bottom pattern are:
- It's construction: A triple top is constructed of three swing highs in the price of a market whereas a triple bottom is constructed of three swing lows in the price of a market.
- What it signals: A triple top pattern signals that the price of a market will reverse from bullish price action to bearish price action whereas a triple bottom pattern signals that the price will reverse from bearish price action to bullish price action.