Triple Bottom
Tue, Apr 15A Triple Bottom is a chart pattern characterized by three equal lows followed by a breakout above resistance. This pattern is classified as a bullish reversal pattern.
All three lows should be relatively equal, well-spaced, and represent clear turning points to establish support. While the lows do not need to be at the exact same level, they should be "close enough." Patterns where the last low is higher than the middle one tend to yield better results.
The Triple Bottom pattern resembles the Inverse Head and Shoulders pattern, as both consist of a series of three highs and lows. However, in the Triple Bottom, all three lows are approximately the same height, whereas in the Inverse Head and Shoulders, the second low is lower than the first and third highs.
The formation of a Triple Bottom suggests that a downtrend is reversing into an uptrend. Selling pressure is diminishing, indicating that the downtrend is losing momentum. Similar to a Triple Top, it is generally believed that the longer a trend takes to develop, the more significant the price change will be once a breakout occurs.
Triple Tops and Bottoms are among the slowest chart patterns to fully develop. During the formation of a Triple Bottom, it may resemble other chart patterns. For instance, before the third low appears, it might look like a Double Bottom. Additionally, three equal highs can also be observed in a Descending Triangle or Rectangle.
In a Triple Bottom, the support level can be identified by drawing a line at the base level of the lows, creating a "Neckline." Traders may choose to enter a long position once the price surpasses this resistance level. Until a breakout occurs, the Triple Bottom should be regarded as a neutral chart pattern, maintaining its structure as much as possible.
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