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What is a Triple Bottom?


Mark Michaels
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A Triple Bottom is a bullish reversal formation that occurs when three equal lows break above the resistance (the neckline) - see sample here.

The triple bottom usually follows an extended trend decline while the bears are controlling the market. The first low typically represents a normal price movement, the second low indicates the rising of the bulls and preparing for a potential reversal. The third low signifies that there's well built support established at the same, or near the same, level and bears may yield when the breakout occurs.

In order to qualify Triple Bottom, there should be three elements in place:

1. An existing downtrend

2. All three bottoms are supposed to be fairly equal, well-spaced and illustrate important turning points.

3. Volume levels should decline throughout the pattern showing that bears are losing the strength and patience as opposed to bulls who are gaining momentum.

The triple bottom pattern may sometimes look like double bottom pattern, especially before the third low takes shape. It may also resemble triangles because three equal lows can also be found in those two.

 

Experienced traders will always search for confirmation of a triple bottom by taking a look at other indicators and chart patterns. One of the indicators that might come in handy when identifying this pattern is relative strength index (RSI).

A trade should be initiated only when the neckline is broken.

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Hello Mark,

Thanks for a great question.

A triple bottom pattern shows a downtrend that is about to change to an ascent. It takes a “WV” shape and has three lows. At the first low, the stock’s price reaches its peak and heads to the preceding support level. This leads buyers into the trade and increases the asset’s value, therefore, creating the second bottom and peak
 Likewise, the final bounce forms the third low allowing traders to take a long position. However, this only happens when the value of the stock creates the third bottom over the prior resistance. The aftermath is an uptrend and piling pressure to offload the security.
In turn, the price reverts to the past low triggering an ascent. If the market takes the same course a third time, resulting in a new low, the pattern is deemed complete when the position surpasses the resistance level. A triple bottom not only occurs in bar and line charts but also candlestick patterns. It’s among the slowest chart models to mature.
 

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Hello Mark,

A triple bottom is a bullish chart pattern used when conducting technical analysis. The pattern is identified when three equal lows appear after which the price breaks above the resistance level.

This pattern usually takes shape after an extended downtrend where sellers control the market. The first bottom typically represents a normal price movement, however, the second bottom indicates that the bulls are gaining control and a reversal could be expected. Ultimately, the third bottom signifies a strong support level and tells us that bears may give in once the price breaks above resistance levels.
 

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