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Tutorial on Triple Top Chart Pattern

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What is Triple Top Chart Pattern?

Triple Top Pattern is very reliable, bearish reversal pattern. It is formed after an uptrend. It consists of three consecutive peaks or tops formed at a regular interval and of almost the same heights.
1.Top One: Top one or peak one is formed in continuation of the uptrend. There is a formation of new high followed by a pull back(10-20%) till the neckline(Support).
2.Top Two: Price again moves from neckline to make another high called the second top or peak 2 or resistance 2 followed by a pull back(10-20%) again till the neckline.
3.Top Three: Third top or third peak is formed when the price movers towards the resistance for the third time before giving a breakout.
4.Neckline Support: It is the line drawn through the bottom of the top one, top two till the top three. It serves as a important support to the pattern.

Understanding Triple Top Chart Pattern:Triple top chart pattern is formed when the buyers have faith in the stock and take the price to a new high (Top1) but fails to continue so due to the resistance, results in a pull back. Again the buyers tries to rise the price but fails to get enough momentum to further increase the price result in a second pull back. Same sentiments of buyers are involved in the formation of third top. After all this attempts buyers looses their faith and sellers took over buyers resulting in the fall in price and reverse in the trend.
Duration: It takes several minutes to several months for this pattern to be formed. The longer the duration the more reliable the pattern is, after the breakout occurs.

Shape: Theoretically the triple top should be symmetrical that means all the three tops should be of nearly equal heights and spaced almost equally from each other. However practically the three highs are not necessarily of equal heights and spaced equally from each other. The tip of the top may be from pointed to round shape and hence for the neckline also its not necessary to be horizontal, it can be sloping upwards or downwards.

Breakout:It is very important for this pattern confirmation. Triple top is considered reliable only when the price closes below the neckline support or the confirmation point(lowest low of the pattern) and there is often high jump in volume. If the price don't close below the confirmation point then it may not be a triple top pattern.
One can often seen a pull back after a breakout which is in support of this pattern formation. However the important thing to note is the pull back is to test the neckline support which later becomes the resistance. It is always advisable to keep a stop loss in a pull back.
Volume: It plays a crucial role in confirming the pattern. With the formation of triple top chart pattern there is a decrease in volume. Therefore generally the volume is higher in the first peak, followed by second peak and third peak. A decrease in volume indicates that the buyers are loosing interest which is favorable to the formation of the pattern. Near breakout there in an increase in volume which further confirms the reliability of the pattern.

Price Target:A rough price target can be calculated by measuring the vertical distance between the highest peak (resistance) and the neckline support. However other technical indicators have to keep in mind here as well.

Triple Top Chart Pattern Formed By Exide Industries Ltd - Example 1


Triple Top Chart Pattern example : Exide Industries Ltd
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Total Comments 1

User Comments
Posted by Skumar
Posted on: 30-Oct-2015
Hi, does this applicable for all time frames ?
 suresh


(All analysis is based on End of Trade day's Value. Expected time of update is between 5 to 5.30 PM exchange time Zone)

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