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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Bulkowski's Triple Tops

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Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/18/2017
22,331 63.01 0.3%
9,515 -31.61 -0.3%
739 -7.54 -1.0%
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22,450 or 21,500 by 10/01/2017
9,750 or 9,200 by 10/01/2017
775 or 730 by 10/01/2017
6,650 or 6,200 by 10/01/2017
2,600 or 2,425 by 10/01/2017

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

Triple Tops: Summary

Triple tops are chart patterns with decent performance in a bull market. The failure rate is higher than I like to see, but the average decline is reasonable. Thus, if you own a stock and the triple top confirms ( price closes below the lowest valley in the pattern), then consider selling immediately.

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For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book. pictured on the left, pages 779 to 794.

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Triple top chart pattern
Triple Top Chart Pattern

 

Triple Tops: Important Bull Market Results

Overall performance rank (1 is best): 7 out of 21
Break even failure rate: 10%
Average decline: 19%
Pullback rate: 61%
Percentage meeting price target: 40%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Triple Tops: Identification Guidelines

CharacteristicDiscussion
Price trendUpward leading to the pattern.
ShapeThree peaks near the same price with a downward breakout.
Middle peakSometimes the middle peak is priced marginally below the other two.
VolumeTrends downward 59% of the time, but is usually high beneath formation of each peak.
Bear marketMore triple tops appear in a bear market than in a bull one.
ConfirmationThe pattern becomes valid when price closes below the lowest valley in the pattern.
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Triple Tops: Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from the highest peak (point B in the Measure Rule figure to the right) to the lowest valley (A) and then multiply it by the above “percentage meeting price target.” Subtract the result from the lowest valley (A) to get a price target (C).
Price reversalPrice must have something to reverse, so if the rise leading to the pattern is small, expect a small decline.
ConfirmationWait for price to close below the lowest valley (confirmation, point A in the Measure Rule figure to the upper right) before placing a trade.
PeaksWhen the last peak (point B in the Peaks figure to the right) is below the middle one (A), then expect a stronger decline. A lower top suggests weakness as price attempts to make a new high but fails.
Price velocityA high velocity rise leading to the pattern often results in a larger decline post breakout.
Yearly highPatterns in the highest third of the yearly price range perform best.
Volume trendAn upward volume trend suggests better post breakout performance.
Quick declineA quarter of the tops reach the ultimate low in the first week after a breakout. A third bottom in less than 2 weeks.
PullbacksPullbacks hurt post breakout performance.
Triple top chart pattern measure rule
The Measure Rule

Triple top chart pattern peaks

Peaks

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Triple Top Example

Triple top chart pattern example

The above figure shows an example of a triple top chart pattern with tops at 1, 2, and 3. Price does not rise far leading to the triple top and the decline after the triple top confirms (price closes below the blue confirmation line) is not that large either. A pullback brings price back up to the confirmation line before resuming the decline.

-- Thomas Bulkowski

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Other Triple Top Examples

See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Make it idiot proof and someone will make a better idiot.