The triple bottom is the inverted triple top, which usually appears in the bottom area after a long-term decline in the stock price, indicating that the stock price may rebound at any time.
Triple Bottom Pattern Definition
The triple bottom pattern is when the stock price forms a bottom in a falling market with three similar lows, usually some time apart, and the volume of each low will change, and the triple bottom pattern is confirmed when the stock price starts to rebound after hitting the low for the third time and successfully breaks through the neckline formed by the connection of the previous two lows.
Morphological characteristics of the triple bottom
In the process of falling, the stock price forms three similar lows, which are usually at the same level, but do not have to be exactly the same, and the maximum difference between the high and low can reach 3%.
The time interval between the three lows is usually long, generally requiring more than 10 to 15 trading days to ensure the stability of the pattern.
During the formation of a triple bottom, volume usually shrinks gradually until it reaches a minimum at the third low, and then amplified significantly when the stock price begins to rally and break through the neckline.
The stock price must effectively break through the neckline formed by the connection of the previous two lows to confirm the success of the triple bottom pattern.
The formation process of the triple bottom pattern
The first bottom: the stock price first touched the first low in the process of falling, at this time the power of the long and short sides reached a balance, the stock price began to rebound, the stock price rebounded to a certain height and then fell back by resistance, but did not fall below the first low, forming the first bottom.
Second bottom: The stock price falls again and hits the second low, which is close to the first low, at which point, the bulls gradually gain strength and the stock price rebounds again.
Third bottom: The stock price falls back again after the rally, but instead of falling below the first two lows, it forms a third bottom, at which point the bears have exhausted their power and the bulls have the upper hand.
Neckline: The stock price began to rebound after the third dip and successfully broke through the neckline formed by the connection of the previous two lows, and the triple bottom pattern was confirmed.
Operational points of the triple bottom
The triple bottom pattern is an important signal that the stock price has bottomed out, and investors can actively buy when the stock price breaks through the neckline.
Two selling points: one is when the stock price rises from the third bottom and effectively breaks through the neckline resistance level, and the second is when the pullback falls to the neckline support level and rebounds.
It cannot be considered as a triple bottom pattern based on three low points, and the three bottoms only indicate that there is a prototype of a triple bottom, and the future development is very likely to evolve to the triple bottom, and whether it can constitute a triple bottom and form a strong upward offensive needs to be further verified.
In short, investors should ensure that the stock price has effectively broken through the neckline and the trading volume has been significantly amplified when judging the triple bottom pattern, although the triple bottom pattern is a more reliable buy signal, investors should still pay attention to risk control and avoid blindly chasing higher.
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