John Lansing

Technical Analysis 101: Triple-Bottom

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A triple-bottom pattern displays three distinct minor lows at approximately the same price level. The triple-bottom is considered to be a variation of the head-and-shoulders bottom. Like that pattern, the triple-bottom is a reversal pattern.

The only thing that differentiates a triple-bottom from a head-and-shoulders bottom is the lack of a "head" between the two shoulders.

The triple-bottom illustrates a downtrend in the process of becoming an uptrend. It is, therefore, vital to the validity of the pattern that it commence with prices moving in a downtrend.

The triple-bottom pattern is composed of three sharp lows, all at about the same price level.

Prices fall to a support level, rise, fall to that support level again, rise, and finally fall, returning to the support level for a third time before beginning an upward climb. In the classic triple-bottom, the upward movement in the price marks the beginning of an uptrend.

Traders should note that the three lows tend to be sharp. When prices hit the first low, sellers become scarce, believing prices have fallen too low.

If a seller does agree to sell, buyers are quick to buy at a good price. Prices then bounce back up. The support level is established and the next two lows also are sharp and quick.