Triple Bottom: What the chart pattern means and how to make money using it

The Triple Bottom is one of the technical formations that indicates a bullish outlook for the stock / commodity / index. It reflects building up of positive sentiment among market players and signals a bullish reversal, majorly supported by strong volumes.
 
The Triple Bottom depicts the price holding the negative weakness around three varied, but nearby, levels. These three different price levels demonstrate that bulls are gaining control of the price action and not allowing the stock price to fall further. Such a scenario is expected to build positivity in the days ahead and the stock price is expected to show an upward reversal.

 
Although these three bottoms are usually near the same levels, in some cases the support levels may vary. That said, there should not be any exaggerated difference in the levels. Furthermore, these levels show candlestick formations that indicate a possible turnaround. Doji, hammer, and long body candles show a positive sentiment, while the follow-up sessions continue to build positivity.
 

The Triple Bottom is successful after crossing the resistance which is normally the earlier shorting levels. Once the resistance is crossed and breakout happens, the positive sentiment is expected to flourish. Market participants opt to go long in a trade with trend providing safer opportunities in intraday sessions and short-term trades. Going forward, the scenario may depict gap-up sessions with Buy-today, Sell-tomorrow (BTST) becoming the most profitable trade.

 
Key features of Triple Bottom
 
-- Triple Bottom pattern is formed after a prolonged downtrend.
 
-- When the breakout is followed by strong rising volumes, the signal is said to bear a firm strength.
 
-- Triple Bottom is a bullish reversal chart pattern that analysts prefer to trade on with a long-term outlook.
 
-- The sideways formation of Triple Bottom is seen as the most reliable and profitable pattern.
 
-- Major technical indicators must have moved above their respective oversold conditions.
 
One of the key aspects of Triple Bottom is to correlate the breakout with technical indicators and price indicators. The securities possessing positive convergence of moving averages assist in providing support and help in averaging the holding position. Moving averages running in the upward direction highlights the bullish sentiment of the market players.

 
Technical Indicators like Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), Stochastic, Williams R, Commodity channel index, etc, when making a positive crossover by trading above the oversold condition, signal a build-up of positive price strength. CLICK HERE FOR THE CHART

 
Target and Stop-loss
 
The target is the difference of the resistance and support (three lows) level for the upward breakout. The stop–loss merely depends on the strength of the price action. It could be placed below the resistance level or may be considered as the lowest of the three bottoms.
 
However, if the breakout is supported by other relevant indicators, then the target may eventually see double – triple gains. Also, follow-up buying plays a crucial role in the surge of the respective instrument.