Triple Bottom
A triple bottom is a bullish chart pattern used in technical analysis that's characterized by three equal lows followed by a breakout above the resistance level.
Triple Bottom Pattern
Definition
The Triple Bottom Pattern is a bullish chart pattern used in technical analysis, characterized by three equal lows followed by a breakout above resistance. This pattern typically indicates a reversal in market trend from a downtrend to an uptrend.
Origin
The concept of the Triple Bottom Pattern originates from the early stages of technical analysis, which itself began in the late 19th and early 20th centuries. Analysts like Charles Dow and others observed recurring chart patterns through market price and volume changes, including the Triple Bottom Pattern.
Categories and Characteristics
The Triple Bottom Pattern can be categorized into the following types:
- Standard Triple Bottom: The three lows are almost at the same level, indicating strong support at that level.
- Ascending Triple Bottom: Each low is progressively higher, showing that the support level is rising.
- Descending Triple Bottom: Each low is progressively lower, but eventually breaks above resistance, indicating a reversal after a short-term downtrend.
Main characteristics of the Triple Bottom Pattern include:
- Three relatively equal lows.
- Rebound highs between the lows are roughly the same.
- Breakout above resistance is usually accompanied by increased volume.
Specific Cases
Case 1: On the daily chart of a stock, the price formed three lows around $10, then broke above the $12 resistance level. After the breakout, the price quickly rose to $15, confirming the bullish signal of the Triple Bottom Pattern.
Case 2: A cryptocurrency formed three lows around $5000 on the 4-hour chart. The price then broke above the $5500 resistance level and quickly rose to $6500 after the breakout, indicating a strong uptrend.
Common Questions
Question 1: How to confirm the validity of a Triple Bottom Pattern?
Answer: To confirm the validity of a Triple Bottom Pattern, observe whether the price breaks above the resistance level and if the breakout is accompanied by increased volume.
Question 2: What is the difference between a Triple Bottom Pattern and a Double Bottom Pattern?
Answer: A Triple Bottom Pattern has three lows, while a Double Bottom Pattern has only two. The Triple Bottom Pattern is generally stronger and indicates a more reliable reversal signal.
