What is a triple bottom pattern?

The triple bottom pattern is a trend reversal pattern. This means it normally occurs at the bottom of a trend and signals that the stock will most likely head up.

The triple bottom occurs when a stock that is heading down finds strong support and rally’s off of it. It bounces up and down and fails to break this support 3 times in a row. Finally the stock actually breaks higher on strong volume. This is the buy signal.

volume The volume is normally highest during the formation of the first bottom. If however the volume is higher on the 3rd bottom that may signal that the stock has a higher upside potential.

Target The target for this pattern is found by subtracting the top of the pattern by the bottom of the pattern and adding the difference to the top. In this case the top is $14.5 and the bottom is $12.27. This gives us a target of $2.23.

We would expect the stock to head up to $16.73. This stock went up to $17.25, so it went past that target by a little bit. Which is always a good thing if you were bullish on the stock.

Trading the pattern A professional trader might decide to buy the stock during the breakout and put a stop under the level it just broke out of. That is $14.5 in this case. They would also look at what their target is and compare it to how much they may lose on the trade if things do not go well.