What is triple bottom pattern and how to do trading with it?
A triple bottom pattern is a bullish chart pattern, used in technical analysis to predict the end of downward trend. The pattern can be present at all time frames, but it is effective in a downward trend. It forms when the price action bounces off the support level three times, forming three inverted peaks of similar height.
It Indicates that the buyers are getting stronger at the support level and keeping the price action to go lower any further, while sellers are trying to keep the momentum up but unable to do so. It acts similar as the Double bottom pattern but with an extra inverted peak
How to identify the pattern?
- Look for the downward trend which finally reached a low with large number of buying activity. It will prevent the seller to keep the bear run going.
- Formation of the triple bottom in the downtrend, which will indicate that the buyers are dominating the market. When the price bounces at the support level forming the third inverted peak, all the buyers notice that the sellers are getting weak and unable to keep the momentum. This is the time majority of buyers comes in and breaks the Neckline and the price goes even higher.
- The breakout point is important at the neckline.
When to take entry if Triple Bottom pattern is formed?
You can enter into a position during the breakout after three similar inverted peaks are formed. The closing of the breakout candle will be your entry point.
Where to add stoploss and Target in Triple top pattern?
Stoploss – Add stoploss at the opening of the breakout candle
Target – The Price gap between the Neckline (resistance level) and the low of the inverted peaks, will be the target for you from neckline upwards.
Often, price action after forming few candles will go back to the Neckline (which is now support level) for a re-testing and bounces back, this will be another opportunity for the traders to take position in the market.
Stoploss – Add stoploss at the opening of the re-testing candle, if it is bounced back.
Target – The Price gap between the Neckline (support level) and the High of the peaks, will be the target for you from neckline upwards.