The triple top is a reversal chart pattern featuring three peaks at the same level, making it different from the head and shoulders, which has a larger middle peak compared to the other two. The three peaks are followed by a breakout from the support. The area of the peaks is the resistance level in the pattern.
Before the three peaks emerge, the price experiences an uptrend. After the formation of the first peak, the price experiences a swing low. The peaks themselves are well spaced and are reasonably equal in height. The triple top development includes a decline in overall volume with occasional increases when the price reaches the top points. After the third top, the volume expands during the drop and at the support level.
Confirmation of the triple top pattern happens when the support breaks. The support level is the lowest of the swing lows. The support now acts as a possible resistance level that is sometimes tested with a reaction rally, a rally that stops before it reaches the point from where the decline started. The price target is the distance from the support line to the high points minus the support break.
A triple top reversal pattern usually takes three to six months to form. Throughout this development, the pattern can take the shape of a double top and other patterns as well. Traders also combine the triple top with other indicators, such as MACD, to confirm the bearish crossover after the final high. To learn more about the triple top reversal stock trading pattern click here.