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The Triple Top Reversal is a bearish reversal pattern

The Triple Top Reversal is a bearish reversal pattern

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The Triple Top Reversal is a bearish reversal pattern typically found on bar charts, line charts and candlestick charts. There are three equal highs followed by a break below support. As major reversal patterns, these patterns usually form over a 3 to 6 month period.chart. We will first examine the individual parts of the pattern and then look at an example.

trtipletop

  1. Prior Trend: With any reversal pattern, there should be an existing trend to reverse. In the case of the Triple Top Reversal, an uptrend should precede the formation.

  2. Three Highs: All three highs should be reasonably equal, well spaced and mark clear turning points to establish resistance. The highs do not have to be exactly equal, but should be reasonably equivalent to each other.

  3. Volume: As the Triple Top Reversal develops, overall volume levels usually decline. Volume sometimes increases near the highs. After the third high, an expansion of volume on the subsequent decline and at the support break greatly reinforces the soundness of the pattern.

  4. Support Break: As with many other reversal patterns, the Triple Top Reversal is not complete until a support break. The lowest point of the formation, which would be the lowest of the intermittent lows, marks this key support level.

  5. Support Turns Resistance: Broken support becomes potential resistance, and there is sometimes a test of this newfound resistance level with a subsequent reaction rally.

  6. Price Target: The distance from the support break to the highs can be measured and subtracted from the support break for a price target. The longer the pattern develops, the more significant the ultimate break. Triple Top Reversals that are 6 or more months old represent major tops and a price target is less likely to be effective.

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