The question most traders and investors ask is…

“What are Triple Tops and how can they improve my trading results?”

Triple Tops are a form of chart pattern that can, and usually do, occur on the chart of any stock or security. These patterns form after an established uptrend and upon completion of the pattern mark the end of the previous uptrend. Understanding this, it should be apparent that this chart pattern appears in stocks with a bullish, or uptrending, bias.

For this reason, these types of patterns are known as “Reversal Patterns” indicating that the trend has reversed itself from uptrending to downtrending.

This pattern is named so because it presents by having 3 distinct “tops” indicating areas where either:

• Buyers ran out of steam  (demand dropped off)

• Sellers where overwhelmed the buyers (more supply than demand)

• Neither the buyers nor the sellers could take control of the price (supply = demand)

Look at this generalization of a Triple Top pattern below. Notice the support levels (in green), resistance levels (in red), and that fact that there are three distinct tops (circled) where the the upward trend of price reversed.

Triple Top Chart Pattern Example

Now, take a look at this same example after the pattern has “completed” by breaking down below the resistance level. One thing that you must consider when trading price patterns is that you should always be mentally prepared for the breakout to retest the old support level which has now become resistance. Make a note of the retest in the example above and understand that when trading these patterns you don’t get spooked out of your trade when this happens. By being prepared for a retest and setting a stop before you place your trade is vital to your trading success.

Triple Top Pattern And Retest

The most well known type of Triple Top Chart Pattern is the “Head and Shoulders.” The name comes from the fact that, of the 3 tops, two of the tops occur around the same price and in between these two is a higher top. The two lower tops are known as the shoulders (in green) and the highest top in the middle is known as the head (in orange) giving this pattern it’s name. The support level (in red) is known as the neckline.

Triple Top Chart Pattern

Understanding how to identify Triple Tops should be in the arsenal of any trader or investor that applies Technical Analysis to their trading criteria. These patterns typically take about two to eight weeks to form using a daily time frame and upon completion of the pattern the price target should be set by subtracting the widest part of pattern from the break of support, or in the example of the Head and Shoulders Pattern, the neckline.

As with all Technical Analysis this pattern can be applied to multiple timeframes and isn’t limited to daily timeframes only. Many day traders use this pattern to empower their trading by helping them to identify areas of support, resistance, and to identify areas of trend reversal.