A triple top can take many forms. It can happen over a short time frame or stretch out over many months. In either case, it is helpful to have a level of support nearby that, if broken, can confirm the pattern. These three stocks formed potential triple tops on their charts, and have been trading in horizontal consolidation. Their channel support lines are now trigger levels to enter short positions.
The daily chart of Coca-Cola Enterprises (CCE) shows the stock moving in a five-month rising channel before breaking above the resistance line in February and trading in a horizontal channel. The top of the horizontal channel is defined by three distinct tests. Channel support at $46 and the 50-day moving average were broken in Friday's session. Moving average convergence/divergence and the Relative Strength Index have both been in bearish divergence to the recent sideways price action, while on-balance volume has deviated around its 21-day average and formed its own support line. The stock is not fully participating in today's rally and it is a short candidate at its current level with an initial stop above the 50-day MA. The channel projects a target back down to the rising channel uptrend line and, while the stock has the potential to take out that trend line, action around this potential support area should be monitored.
Coca-Cola Enterprises (CCE)
Source: StockCharts.com
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International communications and technology company Harris Group (HRS) has a chart very similar to CCE, with a solid uptrend followed by a horizontal triple top channel. The technical price momentum indicators are also the same but on-balance volume has dropped below its 21-period average. The stock broke through channel support and its 50-day MA last week and there is follow-through selling into todays' rally. While the optimum moment to short has passed and with minimal levels of further support down to the 200-day MA, there is still considerable downside. The stock is a short candidate at its current level, with an initial stop above channel support.
Harris Group (HRS)
Source: StockCharts.com
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PerkinElmer (PKI) provides diagnostic tools to the medical industry, and its chart is another example of a potential triple-channel top. This short trade could be initiated at current levels and offers a good risk/reward opportunity with an initial stop above the 50-day MA and the 200-day MA as a potential target.
PerkinElmer (PKI)
Source: StockCharts.com
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At the time of publication, Moreno was short CCE and PKI, although positions may change at any time.