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. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  3. Breakout

    A price movement through an identified level of support or resistance, ...
  4. Double Bottom

    A charting pattern used in technical analysis. It describes the ...
  5. Rounding Top

    A chart pattern used in technical analysis which is identified ...
  6. Cup and Handle

    A pattern on bar charts resembling a cup with a handle. The cup ...
Related Articles
  1. Charting Your Way To Better Returns
    Active Trading Fundamentals

    Charting Your Way To Better Returns

  2. How To Interpret Technical Analysis ...
    Forex Education

    How To Interpret Technical Analysis ...

  3. Basics Of Technical Analysis
    Trading Strategies

    Basics Of Technical Analysis

  4. Analyzing Chart Patterns
    Charts & Patterns

    Analyzing Chart Patterns

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center