A triple top is a bearish reversal candlestick pattern. It is easier to spot the triple top as compared to the head and shoulders pattern; however, it is formed occassionally as compared to the latter.
The triple top is a slight variation of head and shoulders pattern. The primary difference between the triple top pattern and the head and shoulders pattern is that the three peaks are at about the same level in the former case.
Consider an uptrend with each successive higher highs and higer lows.Next consider the formation of the highest peak A-B-C with declining volume. Declining volume at the peak suggests that the uptrend is fading away. Then the price swing sideways for a while.
Triple Top Reversal Pattern
Notice how swings A-B-C, C-D-E, and E-F-G all swing about the same support and resistance level.
This is the scenario where bulls and bears are in tug of war in an attempt to gain control. Untill the winner is decided, the price will swing about the same support and resistance level.
The triple top formation is complete when the support level represented by a dotted line C-E-G-I is violated with increased volume.
When the support level is violated bears are in full control and takes the price lower. Thus the downtrend commences henceforth.
Volume plays a significant role in carving this elegant triple top bearish candlestick pattern. Volume reflects direct buying and selling interestes between bulls and bears while in tug of war.
In general, volume should increase in the direction of the trend.
Reflecting on the role played by volume in carving the triple top pattern above, volume should be light on each rally peak formation at points B, D and F.
Volume then should increase on the breaking of the support level along the swing F-G-H. Next it should decline on the return move along swing H-I. Then finally, it should again expand along swing I-J.
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