|
When we think of Triple Tops or Triple Bottoms, we often think of tops or bottoms that are several weeks or even several months apart. But this technique is still valid, even if the tops or bottoms are only three days apart.
The idea behind a Triple Top or Triple Bottom is that the market has made three attempts at breaking through an important Support or Resistance Level, but has failed. If a market can’t move down, it is a fair assumption that it is likely to move up, at least in the short term.
Let’s take a look at some recent examples on the Euro (EC-Spotv in ProfitSource).
Chart 1
click chart for more detail
Chart 1 above shows that the market has recently made three attempts at the 1.5270 level, and has not been able to close below this level. This is an example of strong support on the bigger picture. If the market cannot break through this level, we would expect it to move up for now, and look to take long trades, rather than short trades.
Should these lows be broken, we would then look for short trade setups. It’s as simple as that, there is no need to complicate it.
This same principle applies on the smaller picture as well. Chart 2 below shows the month of June on the Euro.
Chart 2
click chart for more detail
We can see that the market made lows right on the 1.5400 level for three consecutive days, from June 17 to 19, but couldn’t break through this level. This is another example of a triple bottom, though a less obvious one. The market made one more attempt at this level on June 23, and then turned around and went up strongly.
It pays to watch your market closely, and check it every day, to see what the chart is telling you. Another great example of a three day triple bottom on the Euro was in mid February this year, when the Euro found support around the 1.4600 level.
WD Gann and David Bowden wrote that it was safe to buy around Double or Triple Bottoms, and safe to sell at Triple Tops or Triple Bottoms, but always with stop losses. Never assume a market will do anything, but be ready for all outcomes.
Remember the old Damon Runyan quote, “The race is not always to the swift, nor the battle to the strong, but that’s the way to bet!”
Be Prepared!
Mathew Barnes
|