Reversal Chart Pattern: Triple Tops
The triple tops pattern (three peaks) is similar to the double tops pattern that appears on the line graph, bar, candlestick and also the Point-and-Figure graph. The triple tops pattern is a short-term bearish trend (reversal) pattern that often indicates the end of an ascending trend and the beginning of the downtrend. This triple tops pattern consists of three successive peaks that reach the level of resistance at the same or slightly different levels and the valleys that appear as clear separators between three different peaks. Low levels in the valley are important for price projection purposes as well as volume. Preferably, the volume at each successive peak should be lower than the volume at the previous peak (volume decreasing at each peak).
The triple tops pattern only has an entry signal to sell (sell). This signal is triggered when the price movement is able to break below the support level created from the lowest level of the two valleys. The breakout motion (price break) should be accompanied by an increase in volume because the decreased volume may indicate a false breakout.
The price projection for the triple tops pattern is similar to the double tops pattern. This price projection is calculated by taking the distance between the support level formed at the lowest level of the valley between the peak to the peak level and subtracting it from the point where the support level can then be broken by the price.
However, the price will usually try to retest the previous support level, which will now be the resistance level (after breakout) and may even break back above this level before the downtrend is in effect.
If the resistance level is able to be broken by price movement on a strong volume, you should be cautious and may be an indication of the exit level of the trading and want to re-entry when the price falls back below the resistance level.
This triple top level can be more reliable than double tops because the resistance level at the top has been through three tests and is able to survive.