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What is a 'Triple Top'
The triple top pattern is a type of chart pattern used in to predict the reversal of a long-term uptrend. The pattern occurs when the price of a security creates three peaks at nearly the same price level. The bounce off the resistance near the third peak is a clear indication that buying interest is becoming exhausted, which leads many traders to predict that a long-term reversal is about to occur.
BREAKING DOWN 'Triple Top'
The three consecutive tops make this pattern visually similar to the pattern, but in this case the middle peak is nearly equal to the other peaks rather than being higher. The pattern is also very similar to the pattern, whereby the security only rises to re-test its prior highs one time before breaking down. The key difference between the and triple top is that the pattern doesn't have enough following the second peak, which leaves room for bulls to make another attempt to breakout to new highs.
Trading Triple Top Patterns
Many traders will enter into a short position once the price of the asset falls below the identified , which is often created by connecting the reaction lows during the time that the pattern forms.