Fast Forming Reversal
Stock chart patterns are one of the most important tools that today’s investors have to help them make educated predictions about what will happen to a stock that they are interested in months or even years down the road. While most patterns can only be spotted after long periods of painstaking monitoring, the triple top can actually start to form and be visibly recognizable in as little as three months. This particular pattern is part of the family of reversals, which are patterns that indicate that the trend formerly followed by a particular stock is about to change..
If you’re thinking that the triple top bears a strange resemblance to the head and shoulders top, you’re right. In fact, many technical analysts consider the triple top to be a variation of this very common reversal pattern. One of the only things that sets a triple top apart from a head and shoulders top is the fact that the three distinct high points that are needed to identify the triple top reach up to about the same level, whereas the head of the head and shoulders top pattern will always be a higher peak between the two lower shoulders..
It is most common for a triple top to occur in a situation where prices are trending upward. As the price of a certain security rises to a resistance level, decreases slightly, and then returns to the resistance level again, only to repeat this pattern two more times, the triple top is formed. Then, following the third spike in price, a continued decline will mark the beginning of a downtrend.