What is Triple Top Pattern and how to do trading with it?
Triple top pattern is a bearish pattern. The pattern can be present at all time frames, but it is effective in an upward trend. It is used in technical analysis to predict the reversal of an Upward trend to downward trend. Eventually, It forms when the price action bounces off the resistance level three times, forming three peaks of similar height.
The pattern Indicates that the sellers are getting stronger at the resistance level and keeping the price action to go higher any further, while buyers are trying to keep the momentum up but unable to do so. It acts similar as the double top pattern but with an extra peak.
How to identify the pattern in technical analysis?
- Look for the upward trend which finally reached a high with large number of selling activity. It will prevent the buyers to keep the bull run going.
- Formation of the triple tops in the uptrend, which will indicate that the sellers are dominating the market. When the price bounces at the resistance level forming the third peak, all the bears notice that the buyers are getting weak and unable to keep the momentum. This is the time majority of sellers comes in and breaks the Neckline and the price goes even lower
- The breakout point is important at the neckline.
When to take Entry if the pattern is formed?
Breakout
When the three equal height peaks are formed, there will be a breakout near the neckline as seen in the above image. 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 (support level) and the High of the peaks, will be the target for you from neckline downwards.
Re-Test position
Often price action after forming few candles will go back to the Neckline (which is now resistance 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 Breakout candle.
Target – The Price gap between the Neckline (support level) and the High of the peaks, will be the target for you from neckline downwards.