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Tutorial on Triple Bottom Chart Pattern

Triple Top

What is Triple Bottom Chart Pattern?

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

Understanding Triple Bottom Chart Pattern:
Triple bottom chart pattern is formed when the sellers have faith that the stock price will go down further which leads to a new low (bottom1) but fails to continue so, due to the Support Basics, results in a pull back. Again the sellers tries to reduce the price but fails to get enough momentum to further decrease the price which results in a second pull back. Same sentiments of sellers are involved in the formation of third bottom. After all this attempts sellers looses their faith and buyers took over sellers resulting in the rise 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 bottom should be symmetrical that means all the three bottoms should be of nearly equal heights and spaced almost equally from each other. However practically the three lows are not necessarily of equal heights and spaced equally from each other. The tip of the bottom 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 bottom 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 bottom 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 which later becomes the support.It is always advisable to keep a stop loss in a pull back.

Volume: Volume plays a crucial role in confirming the pattern. With the formation of triple bottom chart pattern there is a decrease in volume. Therefore generally the volume is higher in the first bottom, followed by second bottom and third bottom. A decrease in volume indicates that the sellers 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 showing that the buyers are taking over the sellers.

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

Triple Bottom Chart Pattern Formed By Sun Pharmaceutical Ltd-Example1


Triple Bottom Chart Pattern example : Sun Pharmaceutical Ltd

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Triple Top

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