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. How do I find the information needed for input into the Dividend Discount Model (DDM)?

    Analysts and investors should utilize a company’s financial statements, stock information websites and any number of analysis ... Read Full Answer >>
  5. What does the Dividend Discount Model (DDM) show an investor about a company?

    The dividend discount model, or DDM, is not designed to be used in forecasting any possible capital gains from increases ... Read Full Answer >>
  6. If a company has a high debt to capital ratio, what else should I look at before ...

    A variety of equity valuation metrics can be utilized to evaluate a company along with the debt to capital ratio to get a ... 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. Charts & Patterns

    Why These May Be the Top 4 Growth Stocks of 2015

    These four stocks have high upside potential in 2015.
  6. Chart Advisor

    Interested in Growth Stocks? See These 4 ETFs

    Given the rise in popularity of growth ETFs, there are several interesting growth stock choices for investors.
  7. Chart Advisor

    Watch Out For Falling Copper Prices

    Commodity traders have been turning their attention toward copper prices over the past several weeks.
  8. Chart Advisor

    Watch for Bullish MACD Crossovers in These Stocks

    These stocks are trending higher but recently experienced a pullback. Watch for a bullish MACD crossover to indicate upward momentum is continuing.
  9. Trading Strategies

    Bucking The Trend With Pattern Failure Strategies

    The best trade could be in the opposite direction when a classic price pattern doesn't behave according to ideal rules.
  10. Chart Advisor

    Buying Opportunities on Upside Wedge Breakouts

    Find buying opportunities in these stocks, which have seen their prices break out of long-term declining wedge patterns.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center