how to trade a triple bottom
the price target for a double bottom reversal is typically the distance between the lows and the breakout point added to the breakout point for example if the low is 10 00 and the breakout is at 12 00 the price target would be 12 10 2 12 14 14 00 stop loss points are usually placed just below the breakout point and or below the triple bottom lows the triple bottom is similar to the double bottom chart pattern and may also look like ascending or descending triangles traders always look for confirmation of a triple bottom using other technical indicators or chart patterns for example traders might note that the stock has an oversold relative strength index rsi before a double bottom forms and or look for a breakout to confirm that it s a triple bottom rather than a descending triangle or other bearish pattern an example of a triple bottomthe following chart shows an example of a triple bottom chart pattern in this example momenta pharmaceuticals stock formed a triple bottom and broke out from trend line resistance the difference between the third bottom and the breakout point was about 1 75 which translated to a take profit point of around 15 50 on the upside the stop loss point could have been placed at around 13 50 to limit downside risk as well the difference between a triple bottom and a triple topthe triple top is the opposite pattern of a triple bottom instead of a bullish reversal a triple top is a bearish reversal pattern where price action bumps off resistance three times posting three roughly equal highs before plummeting down through resistance that said these are essentially mirror patterns of the same market phenomenon a prolonged battle for control between the bears and bulls where one side emerges victorious if no winner emerges a triple bottom or top will simply become a longer term range limitations of a triple bottomthere is always some uncertainty when trading charting patterns as you are working with probability as with most patterns the triple bottom is easiest to recognize once the trading opportunity has passed double bottoms may fail and become a triple bottom and the triple bottom and the head and shoulders pattern can by definition be one and the same however the most often cited limitation of a triple bottom is simply that it is not a great risk and reward tradeoff because of the placement of the target and stop loss to ramp up the profit potential traders may choose to put their stop loss inside the pattern and trail it up as the breakout occurs the issue with this is the likelihood of being stopped out in the range for a small loss is higher 