Rounding Bottom

AAA

DEFINITION of 'Rounding Bottom'

A chart pattern used in technical analysis, which is identified by a series of price movements that, when graphed, form the shape of a "U". Rounding bottoms are found at the end of extended downward trends and signify a reversal in long-term price movements. This pattern's time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence.

The chart below illustrates a rounding bottom.

Rounding Bottom

INVESTOPEDIA EXPLAINS 'Rounding Bottom'

A rounding bottoms look similar to the cup and handle pattern, but does not experience the temporary downward trend of the "handle" portion. The initial declining slope of a rounding bottom indicates an excess of supply, which forces the stock price down. The transfer to an upward trend occurs when buyers enter the market at a low price, which increases demand for the stock. Once the rounding bottom is complete, the stock breaks out and will continue in its new upward trend.

RELATED TERMS
  1. Double Top And Bottom

    Chart patterns in which the quote for the underlying investment ...
  2. Cup and Handle

    A pattern on bar charts resembling a cup with a handle. The cup ...
  3. Breakout

    A price movement through an identified level of support or resistance, ...
  4. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  5. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  6. Double Bottom

    A charting pattern used in technical analysis. It describes the ...
RELATED FAQS
  1. How do I implement a forex strategy when spotting a Rounding Bottom Pattern?

    Two keys to implementing a successful forex trading strategy to profit from a bullish market reversal indicated by a rounding ... Read Full Answer >>
  2. How are Rounding Bottom patterns interpreted by analysts and traders?

    Rounding bottom formations are commonly interpreted by traders and market analysts as slow-forming transformations from a ... Read Full Answer >>
  3. How effective is creating trade entries after spotting a Rounding Bottom pattern?

    The rounding bottom pattern, also known as the saucer, is a very reliable reversal pattern. A long-term pattern forming over ... Read Full Answer >>
  4. When should a company consider issuing a corporate bond vs. issuing stock?

    A company should consider issuing a corporate bond versus issuing stock after it has already exhausted all internal forms ... Read Full Answer >>
  5. What is price-to-book ratio is typical in the electronics sector?

    In fundamental analysis, book value is an important concept for measuring a business's value. Book value equals total assets ... Read Full Answer >>
  6. How does private placement affect share price?

    Private placement is a common method of raising business capital through offering equity shares. Private placements can be ... Read Full Answer >>
Related Articles
  1. Active Trading Fundamentals

    Charting Your Way To Better Returns

    Learn about the powerful hybrid techniques that take advantage of both technical and fundamental analysis.
  2. Forex Education

    How To Interpret Technical Analysis Price Patterns: Triple Tops And Bottoms

    Triple and double tops and bottoms may be tough to spot, but once you learn them, they can be powerful patterns.
  3. Trading Strategies

    Basics Of Technical Analysis

    Learn how chartists analyze the price movements of the market. We'll introduce you to the most important concepts in this approach.
  4. Charts & Patterns

    Analyzing Chart Patterns

    Learn how to evaluate a stock with a few easy-to-identify patterns.
  5. Investing

    Do Record Stock Highs Signal A Top?

    Despite higher rates, U.S. stocks have been posting new records in recent weeks, despite investor concerns about slowing U.S. corporate profit growth.
  6. Chart Advisor

    ChartAdvisor for May 29 2015

    Weekly technical summary of the major U.S. indexes.
  7. Trading Strategies

    Pros & Cons Of Day Trading Vs Swing Trading

    Day trading involves making dozens of trades in a single day, based on technical analysis and sophisticated charting systems. Swing trading is based on identifying swings in stocks, commodities, ...
  8. Fundamental Analysis

    Online Gaming Industry Stocks

    A look at some of the top stocks in the online gaming industry.
  9. Stock Analysis

    Invest In Cyber Security With These Stocks

    Learn about some amazing cyber security plays in this hot sector.
  10. Charts & Patterns

    The 6 Most Profitable Grocery Stores

    These are the six largest grocery store chains operating in the United States.

You May Also Like

Hot Definitions
  1. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  2. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  3. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  4. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  5. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center