Rounding Top

AAA

DEFINITION of 'Rounding Top'

A chart pattern used in technical analysis which is identified by price movements that, when graphed, form the shape of an upside down "U". A rounding top may form at the end of an extended upward trend and indicates a reversal in the long-term price movement. The pattern can develop over several weeks, months or even years, and is considered a rare occurrence by many traders.

The chart below illustrates a rounding top.

Rounding Top

BREAKING DOWN 'Rounding Top'

This pattern is also described as an inverse saucer. A rounding top represents a sell signal to technical analysts. The initial upwards trend becomes exhausted as the demand for the stock dries up. The reversal to the downward slope of the rounding top indicates that demand has tapered off and a surplus supply is present, basically there are more sellers than buyers. A rounding top represents a bearish take on the stock.

RELATED TERMS
  1. Breakout

    A price movement through an identified level of support or resistance, ...
  2. Double Top

    A term used in technical analysis to describe the rise of a stock, ...
  3. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  4. Rounding Bottom

    A chart pattern used in technical analysis, which is identified ...
  5. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  6. Middle Market

    Definition of middle market
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. Trading Strategies

    3 Key Signs Of A Market Top

    Learn the best ways to foresee market corrections and how to profit from them.
  3. 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.
  4. Active Trading Fundamentals

    Digging Deeper Into Bull And Bear Markets

    Discover why it's important to know the characteristics of the two types of market conditions.
  5. 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.
  6. Charts & Patterns

    Analyzing Chart Patterns

    Learn how to evaluate a stock with a few easy-to-identify patterns.
  7. Chart Advisor

    3 Ways to Trade the Rising Volatility

    With volatility increasing in the markets, many are turning to these three volatility-capturing exchange-traded products.
  8. Chart Advisor

    Big Double Top Patterns On the Verge of Breaking

    These stocks have created big double top chart patterns, and are on the verge of breaking the patterns to the downside--a bearish signal.
  9. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  10. Investing Basics

    A Primer On Investing In The Tech Industry

    The tech sector can provide fantastic returns for investors with a little know-how in the field.
RELATED FAQS
  1. How do I build a profitable strategy when spotting a Rounding Top pattern?

    A profitable stock trading strategy can be designed to take advantage of an extended downtrend in price occurring after the ... Read Full Answer >>
  2. How do I implement a forex strategy when spotting a Rounding Top Pattern?

    A trader can implement an aggressive forex trading strategy designed to obtain maximum profit from recognizing a rounding ... Read Full Answer >>
  3. How effective is creating trade entries after spotting a Rounding Top pattern?

    Trade entries created after recognizing a rounding top pattern can be very effective, but they must be carefully managed ... Read Full Answer >>
  4. How are Rounding Top patterns interpreted by analysts and traders?

    Rounding top patterns are interpreted as bearish market reversals formed by a gradual transition from an uptrending market ... Read Full Answer >>
  5. What is the Coppock curve?

    Technical analysis claims the ability to forecast future movements of financial instruments, such as stocks or commodities, ... Read Full Answer >>
  6. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!