Technical Analysis 101: Triple Tops and Bottoms

Fear and greed dictate just about everything.

And if we can spot where either has become overdone, it can present opportunities.

One way to do just that is by looking for signs of considerable support and resistance.  We already know that the more fear there is in an asset, the higher the chance the value of that asset will decline.  And we already know that the more greed there is in an asset, the higher the chance the value of that asset will increase.

To spot where fear may soon give way to greed, we begin to look for double and triple bottoms, for instance.  We’ll look for a series of low points when a stock continues to fall to a certain level, but then doesn’t fall any more. If it happens twice at the same level of support, we have a double bottom argument.  If it happens three times, we’ve just found triple bottom support.

The same thing happens with double or triple tops.  These can typically be found at the peak of an upward trend, followed by a pullback, followed by another test of prior resistance.  If it happens twice, we have a double top.  If it happens three times… you get the picture.  They’re quite useful so don’t ignore them. 


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While powerful, the double and triple top or bottom should never be used as a sole indicator.  As always, confirm with other indicators such as Bollinger Bands, MACD, relative strength, Money Flow and even Williams’ %R.

Confirmation of trend is essential to you success.

Gold is the perfect example with double and triple tops and bottoms with confirming indicators.  Look at what has happened to the price of gold since 2017 began.  Resistance in April 2017 and June 2017 formed a double top, confirmed with overbought reads on Bollinger Bands, MACD, RSI and Williams’ %R.

We also find signs of a triple bottom between March 2017 and July 2017, again with confirming reads from most of the momentum indicators.

Fundamental analysts may not agree that charting works, but I beg to differ.  Technical analysis offers us a glimpse into actual fear and greed, the very psychological indicators that drive just about everything, especially stocks.

It’s something to keep in mind, as you trade.


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