Rounding Bottom

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

BREAKING DOWN '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.

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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 >>
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