Triple top is a trend reversal chart pattern indicating the reversal of an existing uptrend and the start of a new downtrend. The pattern is relatively rare but considered a very reliable signal for short selling and to close long positions. Triple top pattern usually takes lesser time to form than triple bottom pattern and the typical time range is 3 to 6 months.
The requirements of triple top chart formation include,
- The pattern should form at the top of a relatively long uptrend or during sideways movement after an uptrend.
- There should be three price highs (tops) of almost equal heights. There should be reasonable time interval between each high.
- The price breakout of support level marks the trend reversal. The breakout point is the lowest low level during the pattern formation.
- The volume should diminish as the pattern forms and the breakout should be noticeable with increase in trading volume.
Triple top pattern is the result of three failed attempts to make a new high. As bulls continuously fail to break the resistance, the bears start to capitalize on that. The breaking of support level indicates the start of a new downtrend; and this support then turn into a resistance. The immediate price target is derived by subtracting the vertical height from the breakout point to the highs, from the breakout level.
On development, the triple top formation resembles many other patterns like double top pattern and ascending triangle formation. It differs from head and shoulders top pattern in the height of the middle top.
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