The Triple Bottom Reversal is a reversal pattern typically there are three equal lows followed by a break above resistance. As major reversal patterns, these patterns usually form over a 3 to 6 month period.
1. Prior Trend: With any reversal pattern, there should be an existing trend to reverse. In the case of the Triple Bottom Reversal, a clear downtrend should precede the formation.
2. Three Lows: All three lows should be reasonable equal, well spaced and mark significant turning points. The lows do not have to be exactly equal, but should be reasonably equivalent.
3. Volume: As the Triple Bottom Reversal develops, overall levels usually decline. sometimes increases near the lows. After the third low, an expansion of on the advance and at the resistance breakout greatly reinforces the soundness of the pattern.
4. Resistance Break: As with many other reversal patterns, the Triple Bottom Reversal is not complete until a resistance breakout. The highest point of the formation, which would be the highest of the intermittent highs, marks resistance.
5. Resistance Turns Support: Broken resistance becomes potential support, and there is sometimes a test of this newfound with the first correction.
6. Price Target: The distance from the resistance breakout to lows can be measured and added to the resistance break for a price target. The longer the pattern develops, the more significant is the ultimate breakout. Triple Bottom Reversals that are 6 or more months in duration represent major bottoms and a price target is less likely to be effective.
As the Triple Bottom Reversal develops, it can start to resemble a number of patterns. Before the third low forms, the pattern may look like a Reversal. Three equal lows can also be found in a or . Of these patterns mentioned, only the has overtones; the others are neutral until a breakout occurs. Similarly, the Triple Bottom Reversal should also be treated as a neutral pattern until a breakout occurs. The ability to hold support is , but demand has not won the battle until resistance is broken. on the last advance can sometimes yield a clue. If there is a sharp increase in and momentum, then the chances of a breakout increase.