As we have covered the head and shoulders in such depth, the triple top and bottom pattern does not need to have such detail. Most of the points already mentioned in connection with the head and shoulders also apply to this pattern.
Practical Example of Multi-Timeframe Analysis: Triangle Analysis
As you might expect from the name, this pattern looks very similar to the head and shoulders, but the head is at the same level as the other two peaks rather than standing out above them (or below them for the inverted variation) . It’s only a minor variation, and the analysis is essentially the same. It is a much rarer pattern than the head and shoulders, as you can imagine, because as long as the head is above the shoulders, and the shoulders are at similar levels you have a head and shoulders pattern; but a triple top or bottom pattern requires all three points to be at essentially the same level. In fact, you may find technical analysts differing in their opinion of whether a particular pattern is a head and shoulders or qualifies as a triple top or bottom, i.e. whether the points are similar enough in value. This should not worry you, because it’s a moot point – both patterns imply exactly the same thing.
Once again, it is important to look at the volume to get some confirmation of the pattern. After all, a sideways trend would have peaks at the same level for an indefinite time with no reason to anticipate a reversal. Even if the triple peaks come after an uptrend it could simply be an indication that the trend is finished and the price is going to trade in a range, or be trendless for a time, rather than performing a reversal.
What distinguishes the triple top or bottom is that the original trend shows signs of weakening, with reducing volume on each successive peak. This tells you that the market has not settled at the current range. You should see signs of stronger volume each time the price retraces, as well as at the end of the pattern when it breaks through the support level, or neck level. To confirm the pattern you need to see that break through the neck level, with prices closing on the other side. The price should not then go back above the neckline, otherwise the reversal may be failing, but it may return to the line as a resistance level before continuing the reversal.
The minimum price targets are calculated in the same way as with the head and shoulders, too. However high the central peak is above the neckline, you can expect at a minimum that the price will go as far below the neckline or support. You can use this approximation to figure out your potential risk and reward. Again, pay attention to previously established support or resistance lines to get the whole picture.
