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Triple
Top Buy Signal
The
Triple Top is exactly what the name suggests - a chart pattern
that rises to a certain price level three times. The first two
times the stock visits that level, it is repelled by sellers.
The third time the stock rises to that level, it forms the Triple
Top.
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The
buy signal is given when the stock exceeds the level that previously
caused the stock to reverse down.
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There are many reasons why
a stock will encounter supply at certain levels. Think back to
a time when you bought stock thinking it was at a bottom or at
least an opportune price level to buy. Instead of rising, the
stock immediately declined. We have all had experiences
like that. The thought that probably crossed your mind as you
saw the stock lose value was that if the stock got back to even
you were out! This is a perfectly normal human reaction. When
you place that order to get out at your break-even point, you
are in essence creating supply at that level. If more sellers
are willing to sell their stock at that level than buyers are
willing to buy, the stock will decline. The only way we know whether
the selling pressure has been exhausted at a particular level is if
the stock is able to exceed that price. If the stock is repelled
again, the sellers are still there. The more times a stock pulls
back from a resistance level, the stronger the breakout will be
when it comes. It was said years ago that the degree to which a
stock will rise is in exact proportion to the time the stock took
in preparation for that move. In other words, the wider the base from
which a stock breaks out the higher the stock will rise. This is why we consider the
triple top break a stronger pattern than the double top.
Triple Bottom Sell Signal.
The Triple Bottom sell signal, like the Triple Top, has a high
degree of reliability. It is characterized by a stock falling to an area of support three times. The first two times the stock holds and reverses up. The third time there is not enough demand to cause the chart to reverse and instead it exceeds the two previous bottoms giving the triple bottom sell signal.
 Consider for a moment an investor who buys
a stock at $31 per share and then leaves on vacation for one
month. He checks the price frequently and notices that his stock
is still around the price he paid for it, only down a point.
Not bad for a market that had been volatile for the past month.
He feels comfortable with the stock as the fundamentals remain
in place. |
What
is he missing in this puzzle? What he is missing is that a battle
between supply and demand has been completed with supply winning
the match. |
| The probability of lower prices is very
high. The Triple Bottom sell signal does not mean that the stock will cave
in immediately, it suggests that the risk in that position has
increased tremendously. Whether this investor chooses to do anything
about the signal or not, he should at least be aware of it. If
the investor does nothing other than increase his awareness of
a potential decline, he is far
ahead of the investor who holds the same position without any
warning. It is imperative to regularly follow the charts of stock you own. By doing so patterns such as this one will not sneak up on you. |
The
Bullish and Bearish Catapult Formation
The Bullish Catapult is a combination of the Triple Top buy signal and the
Double Top buy signal. This pattern is a confidence builder. The Catapult
is created when a stock gives a Triple Top buy signal which is followed by a pullback producing a higher bottom. Following the pullback, demand regains control and the stock reverses back up and gives a Double Top buy signal. The charts below depict a Bullish Catapult formation.
Notice the Triple Top buy
signal followed by the pullback into a column of O's. Notice
how the column produces a higher bottom. The resumption of trend
completes the Catapult by giving a Double Top buy signal. To better understand what the
Catapult is saying, let's look at each piece of the pattern as illustrated above.
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