Triple Tops

Core idea

A triple top is a bearish reversal made of three distinct minor highs at roughly the same price after an uptrend. The pattern confirms — and only confirms — when price closes below the lowest valley between the three peaks. Until that close, the three peaks are just three peaks. After confirmation, the average bull-market decline is 14% and the average bear-market decline is 22%.

Bulkowski found 2,641 triple tops across 828 stocks. Performance is mid-list in bear markets and worse in bull markets. The 5% failure rate is 25% in bull markets — three times the 8% bear-market rate. The asymmetry is the entire trading thesis: take triple tops as shorts only when the broader market is helping, not fighting you.

Bulkowski's framing: Roughly 25% of triple tops have a slightly recessed middle peak. That feature is common, not disqualifying. A middle peak that towers above the flanks is what makes the pattern a head-and-shoulders top instead.

Why it matters

Three failed attempts by buyers to push price above a level signals supply absorbing demand at that ceiling. Each rejection at roughly the same high is fresh evidence that sellers are stepping in there. The confirmation close below the lowest intermediate valley turns the visual symmetry into a statistically tradable short — but only after the close, and only when the regime cooperates.

Why bull markets hurt this pattern

Bull markets push prices up. A bearish pattern is fighting the prevailing tide. That tide explains why one in four triple tops in bull markets fail at the 5% level — buyers reappear, the broken support is recovered, and the pattern busts. The exact same shape with the exact same confirmation in a bear market sees the failure rate collapse to 8%. The pattern is not "better" in bear markets — the trade is better because the wind is at your back.

Why pullbacks are nearly universal

After the confirmation break, price commonly pulls back up to the broken support line (now resistance) before continuing lower. The pullback is the textbook entry for traders who missed the initial breakdown. It also explains why holding through the first drop is psychologically painful — the bounce can look like the pattern busting before the trend reasserts itself.

Key takeaways

Mental model

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Practical application

Example

A consumer-discretionary stock runs from $45 to $68 over six months on a strong product cycle. It reaches a first peak at $68.20, sells off to $61.80 over five weeks, then rallies to a second peak at $67.90. A second sell-off bottoms at $60.40 — the lower of the two intermediate valleys — and the stock rallies a third time to $68.30. Three peaks within 40 cents; the middle peak is the lowest of the three (which is fine).

The confirmation line is $60.40. The trader marks a sell-stop short at $60.20 and waits. Four weeks after the third peak, the stock closes at $59.10 on volume 1.8x average — the confirmation breakdown. The short fills at $60.20 and the stop is placed at $68.50, above the highest peak.

Six days later, the stock rallies back to $60.30 — a pullback that grazes but does not breach the confirmation line. The trader holds. Over the next three weeks the stock declines to $51.60 — a 14% decline from the breakdown that matches the bull-market average almost exactly. The measure-rule target ($60.40 − ($68.30 − $60.40) = $52.50) is reached within a dollar.

Two structural notes from this example. First, the trader sized the stop to the highest peak rather than to a percentage rule — that ceiling was the only price level where the pattern would be invalidated. Second, the trader took the trade because the broader S&P 500 was in a corrective phase, not a clean bull market. Had the same pattern formed mid-bull-rally, the same trade carries 3x the failure risk for the same chart shape.

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