Commonwealth Bank of Australia (CBA)

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 consistantly 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: Commonwealth Bank of Australia

CBA looks to be almost forming this pattern, with the share price having recently bounced off the resistance level, with the share price heading back to test support, where it bounced off today. As you can see from the chart below, the support level is at $80.56 – a level we call the ‘neckline’. If the share price does continue to fall, and manages to break this key level, CBA will look strongly bearish and a target price of ~$80.00 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 (neckline) at $80.56. If there is not a breakthrough support, we may see BRG track sideways and a ‘channel pattern’ appear.