Triple Bottom formations are reversal patterns with bullish bias, this pattern is not often seen in the forex market (also note Triple Tops, Double Bottoms and Double Tops). Triple Bottoms are identified by three consecutive lows of similar (or almost) height with 2 moderate pull backs up in between (neckline peaks).
The triple bottom can be a major reversal pattern (if found on a daily chart or bigger timeframe) that can be formed after an extended downtrend. This pattern is confirmed when the currency pair price breaks from (it's third bottom) below through the neckline, the most likely price direction is now UP.
What does a Triple Bottom formation look like?
A triple bottom formation is a distinct chart pattern characterized by a rally to a new low (bottom1 or support1) followed by a moderate pull back up (10 -20%) to the neckline (resistance level), a second rally to test a new low ( bottom2 or support2) followed by a moderate pull back up(10 -20%) to the neckline (resistance level) and finally a third rally to test a new low ( bottom3 or support3).
The three lows (bottoms or support levels) are at approximately the same price level. What follows is a pull back up to above the neck line (resistance).
How to trade this pattern?
Go long above the Neck Line (resistance level) when the currency pair price breaks from (it's third bottom) below, the most likely price direction is now UP. Place your stop couple of pips below it's third bottom price!
Your target must be at least twice the distance from it's third bottom break to the neckline.
Example: If the third bottom price is at 1.2300 and the neckline is at 1.2400, your target level must be at least 200 pips when trading the break out!
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