The triple bottom chart pattern typically follows a prolonged downtrend where bears are in control of the market. While the first bottom could simply be normal price movement, the second bottom is indicative of the bulls gaining momentum and preparing for a possible reversal.
The third bottom indicates that there's strong support in place and bears may capitulate when the price breaks through resistance levels.
There are a few rules that are commonly used to qualify triple bottoms:
There should be an existing downtrend in place before the pattern occurs.
The three lows should be roughly equal in price and spaced out from each other.
While the price doesn't have to be exactly equal, it should be reasonably close to the same price, such that a trend line is horizontal.
The volume should drop throughout the pattern in a sign that bears are losing strength, while bullish volume should increase as the price breaks through the final resistance.
The third bottom indicates that there's strong support in place and bears may capitulate when the price breaks through resistance levels.
There are a few rules that are commonly used to qualify triple bottoms:
There should be an existing downtrend in place before the pattern occurs.
The three lows should be roughly equal in price and spaced out from each other.
While the price doesn't have to be exactly equal, it should be reasonably close to the same price, such that a trend line is horizontal.
The volume should drop throughout the pattern in a sign that bears are losing strength, while bullish volume should increase as the price breaks through the final resistance.