Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
As traders, we use technical analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Analysis in simple terms is the study of historic price movements in a chart in search of patterns or consistently traded support and resistance levels. Today we are looking at a Triple Top.
Appearance: A triple top comprises of:
- A strong rally usually to elevated price levels,
- A bounce off a resistance level (old or new),
- A reversal heading bearish,
- The bearish move comes down to a support level (old or new) and again reverses with bullish movement back towards the previous resistance,
- Failing at Resistance a second time is the first indication of the double top,
- Then the test of support once again,
- With the final bounce off resistance indicating the triple top may have formed,
- And a breakthrough support to confirm this.
Pattern: The Triple Top Pattern is an uncommon chart pattern that can appear after the fact in a bearish market. The idea is to recognise it during the third bounce from resistance, watching the formation early on. Once that support breaks, it is a strong broader reversal pattern, and you can look at managing your positions.
Important Note: The Triple Top is only confirmed once it has broken the support level and continued lower. If this doesn’t happen, you would be either looking at a channel forming, or a continuation pattern with further bullish movement.
Example: Breville Group Ltd
BRG looks to be almost forming this pattern, with the share price having recently bouncing off the resistance level, with the share price potentially about to reverse to head back to test support. As you can see from the chart below, the support level at $16.40. If the share price does continue to fall, and manages to break this key level, BRG will look strongly bearish and a target price of $12.75 will be our next level. Remember however, this pattern will not be complete unless we hold the resistance level, and then see a break of the support at $16.14. If there is not a breakthrough support, we may see BRG track sideways and a channel pattern appear. (It is also worth noting that my chart is on weekly increments, to better show how this pattern is forming.)
There are many ways that you could take advantage of these patterns. As a specialist in derivatives, we are able to profit on a stock when it falls as well as when it rises.
If you would like to learn how to pick a stocks direction, then Join us at our live face to face one day “Technical Trading the Australian Market” course.
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