Triple Bottom

A triple bottom is a bullish reversal chart pattern in technical analysis. It forms after a downtrend and consists of three roughly equal lows followed by a breakout above resistance. The pattern signals that selling pressure is waning and buyers may be gaining control.

How the pattern works

• Appears after a prolonged downtrend.
• Price makes three distinct lows at approximately the same level, creating a horizontal support zone.
• Each low is typically separated by rallies that meet resistance at a similar level.
• Volume usually declines during each test of support (showing diminishing selling pressure) and rises on the breakout above resistance (confirming buyer conviction).

Identification rules

Common criteria traders use to qualify a triple bottom:
– An identifiable prior downtrend.
– Three lows that are roughly equal in price and reasonably spaced.
– A horizontal or near-horizontal resistance line connecting the intervening highs.
– Decreasing volume during the pattern and increasing volume on the breakout.

Trading the triple bottom

Entry, stops, and targets:
– Entry: after a clear breakout and (ideally) a volume increase above the resistance line.
– Price target: measured move from the breakout. Calculate the distance between the lows (support) and the breakout level, then add that distance to the breakout price. Example: low = $10, breakout = $12 → target = $12 + ($12 − $10) = $14.
– Stop-loss: commonly placed just below the breakout level and/or below the triple-bottom lows. Some traders place a tighter stop inside the pattern and trail it upward after confirmation, but this increases the chance of being stopped out during the range.

Confirmation and complementary indicators:
– Watch for oversold conditions on RSI before reversal attempts.
– Use volume behavior (falling during lows, rising on breakout) to confirm the pattern.
– Confirm with other indicators or chart patterns to reduce false signals.

Example

A stock formed three similar lows and later broke above the resistance line. The breakout distance from the lows to resistance was about $1.75, implying a take-profit target roughly $1.75 above the breakout. A stop-loss was set near the lows to limit downside risk.

Triple Bottom vs. Triple Top

• Triple bottom = bullish reversal (three lows then breakout upward).
• Triple top = bearish reversal (three highs then breakdown downward).
  They are mirror-image patterns reflecting extended price congestion and a battle between buyers and sellers.

Limitations and risks

• Patterns are probabilistic, not guaranteed. Recognition is often easiest after the move has started.
• Poor risk-reward: target and stop placement can make trades less attractive.
• Can be confused with or evolve into other patterns (double bottom, head-and-shoulders, triangles).
• False breakouts are common; confirmation (volume, retest) helps but does not eliminate risk.

Key takeaways

• A triple bottom suggests a potential trend reversal from down to up after three similar lows and a confirmed breakout.
• Confirm the pattern with volume and other indicators before entering trades.
• Define targets and stops in advance and manage risk; consider that the pattern increases probability but does not assure a successful outcome.