Triple bottom

What it is

A triple bottom is a reversal pattern at the end of a downtrend. Price falls to a low and holds, rallies, falls back to the same low and holds again, then does it a third time. The two rally highs form a resistance line. The pattern completes when price closes above it.

It is a close relative of the double bottom, with one more test of support. It also resembles an inverse head and shoulders, except that the middle low is not deeper than the other two.

Why it forms

Each bottom marks a level where buyers outnumber sellers. The first bounce could be a normal pause. The second shows the demand is still there. By the third, sellers have pushed into the same price three times without breaking it, and every drop has been bought.

The rally highs matter just as much. They are where sellers keep stepping in. Once price closes above them, traders who sold short near those highs are holding losing positions, and buying back to exit adds to the move up.

How to identify it

• A clear downtrend leading into the pattern.
• Three lows at roughly the same price. They rarely match exactly; what matters is that the same zone keeps holding.
• Two rallies between the lows that stop near a similar high. That shared high is the resistance.
• Time between the lows. Bottoms that form over weeks on a daily chart carry more weight than bottoms a few candles apart.
• Volume often dries up into the third low and picks up on the rally that follows.

What confirms it

A candle close above the resistance formed by the rally highs. Higher volume on that close strengthens the signal. A pullback to the broken resistance that holds as support is further confirmation.

What invalidates it

• Price closes below all three bottoms. The support has given way and the bullish case no longer holds.
• After breaking resistance, price quickly falls back and holds inside the range.

Common mistakes

• Calling it on the third bottom. Until resistance breaks, a triple bottom is a range, and ranges can break either way.
• Confusing it with an inverse head and shoulders. If the middle low is clearly the deepest, it is an inverse head and shoulders, with its own neckline and measured move.
• Ignoring the trend. Three touches of support in a sideways market is a range, not a reversal.
• Treating the measured move as a price target. It is a reference for scale, not a forecast.