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

INVESTOPEDIA EXPLAINS '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. Precedent Transaction Analysis

    A valuation method in which the prices paid for similar companies ...
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. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... 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. 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. Fundamental Analysis

    Explaining Price Targets

    A price target is what an investment analyst projects a security’s future price to be.
  8. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
  9. Chart Advisor

    ChartAdvisor for July 30 2015

    Weekly technical summary of the major U.S. indexes.
  10. Active Trading Fundamentals

    Five Biggest Obstacles Facing First-Year Traders

    Address these five obstacles and you'll make significant progress as a first-year trader.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
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!