Price Patterns - A Multiple Top Is a Complex Formation

A multiple top is composed of three or more tops that are approximately the same price. Most multiple tops form over many months and the last top is followed by a significant downside. The tops are usually separated by relatively significant downsides followed by corresponding upsides. So a savvy trader can make money trading the ups and downs of a multiple top formation.

Identifying multiple tops in real time is difficult because the first top can be mistaken for the final peak of the price upside. Or the second top can be thought to be the second top of a double top. And a third top can be thought to be last top of the multiple top formation that has more tops to follow.

Multiple tops do not occur as often as double tops.

Quadruple Top

The Philadelphia Semiconductor Index (SOXX) made a quadruple top between March 10, 2000 and August 24, 2000. The first top was followed by a 32% decline. The second and third tops formed a double top. The fourth top was lower than the first three tops and was followed by a 69.5% decline by October 2, 2001.

Percent Returns for All Buy and Sell Combinations

The percent returns chart shows the gains and losses for the weekly buy and sell combinations from June 1999 through October 2001. The first top has the largest percentage gain of all of the returns.

The green areas represent the profitable returns and the red areas represent the unprofitable returns. Of the 7,875 buy and sell combinations (trades) 3,590 (45.59%) made money and 4,285 (54.41%) did not.

The large red area in the right portion of the chart is the result of buying on the upside before the fourth top and selling on the downside after the fourth top and buying and selling on the downside after the fourth top.

Winners and Losers Map

The winners and losers map has no relief so it simply shows the profitable trades in green and the unprofitable trades in red.The blue vertical line delineates the buy upside (before the fourth top) and sell upside trades from the buy upside and sell downside (after the fourth top) trades. The blue horizontal lines delineates the buy upside and sell downside trades from the buy downside and sell downside trades.

The dark green area represents the highest profitable returns of the buy and sell combinations that occurred during the topping formation.

The buy upside and sell downside trades are represented in the predominantly green area in the upper left of the map. Most (85.96%) of these buy and sell combinations made money. The buy upside and sell downside trades occur in the upper right portion of the map. About one third (35.66%) of these trades made money. The buy downside and sell downside trades are located in the front right portion of the map. Only 21.20% made money so most of that area is red.

Winners and Losers Summary Table

The complete set of buy and sell combination data is listed in the winners and losers summary table.

SOXX - Quadruple Top Winners and Losers Summary
Measure	All	Buy Upside/Sell Upside	Buy Upside/Sell Downside	Buy Downside/Sell Downside
Number Trades	7,875	2,080	3,965	1,830
Number Winners	3,590	1,788	1,414	388
Percent Winners	45.59%	85.96%	35.66%	21.20%
Number Losers	4,285	292	2,551	1,442
Percent Losers	54.41%	14.04%	64.34%	78.80%

Related Articles:

Price Patterns - A Bubble Top Is an Extreme Pattern
Price Patterns - Bump and Run Reversal Top Defines Price Bubble
Price Patterns - A Double Top Signals a Downside
Price Patterns - Head and Shoulders Top Has Three Tops
Price Patterns - Triple Top Signals End of Upside Move
Price Upsides Often Occur in Three Stages

Updated February 25, 2008.