“Triple Top” patterns are multiple top patterns indicating when prices try to make new highs and fail on the last attempt. “Triple top” patterns look like “Head and Shoulders” patterns, and are moderately reliable patterns to trade. However, “Triple top or bottom” patterns do fail and failures may be probably more reliable and stronger as they trade in opposite direction. Most “Triple top” pattern lows occur within 2% to 5% of price range. “Triple tops” are relatively easy to detect and offer a good risk to reward ratio. A confirmation is needed before trades are initiated. Heavy volume is traded in the first swing up, but the remaining swings will incur with diminished volume. In addition, heavy volume is followed at the breakdown of the pattern.
Trade: There are two types of possible trades that occur in “Triple top” patterns. An aggressive trade (short) is placed near the last attempt at the lower high of the previous two swing highs. The second trade is possible when prices close below the lower low of the previous two swings at breakdown.
Target: “Triple top” patterns have excellent risWreward ratio. Measure the depth of the “Triple top” between swings and subtract the depth from breakdown level.
Stop: “Triple top” patterns fail when prices attempt to close above the highest “swing high” of the pattern. Place a “stop” order above the “swing high” of the “triple top” to protect the trade.
Trading Triple Top Pattern
Trading Triple Top Pattern
The example above illustrates a “Triple top” pattern from an intraday Russell Emini futures chart. On February 28,2007, Russell made a significant “Triple top” at the 798 level and was hesitant to cross at the 798 level. On its third failed attempt to close above 798 failure, the pattern suggested a potential short entry.
- After a failed third top, enter a “short” trade one-tick below the low of previous bar at 796.
- Place a “stop” order above the “swing high” at 798.5.
- Targets are set at pattern depth from the “swing low” of the “Triple top” pattern at 786.
Trading Triple Top Pattern
Trading Triple Top Pattern
The example above illustrates a “Triple top” pattern from Dupont’s daily chart. From November, 2005 to January, 2006, Dupont attempted to cross above $43.5 and traded in a price range between $42 and $43.5. In December 2005, Dupont made a final failed attempt to cross the $43.5 level and closed below $42 on its reversal. Closing below the $42 level gave a short trading opportunity.
- Enter a “short” trade below the low of the breakdown bar.
- Place a “stop” order above the last “swing high.”
- Target the depth of the “triple top” pattern from the price entry.