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. Double Top

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

    A method of evaluating securities by analyzing statistics generated ...
  3. Breakout

    A price movement through an identified level of support or resistance, ...
  4. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  5. Rounding Bottom

    A chart pattern used in technical analysis, which is identified ...
  6. Fintech

    Fintech is a portmanteau of financial technology that describes ...
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's the difference between the coverage ratio and the levered free cash flow to ...

    Coverage ratios focus on a company’s ability to manage its debt, while the levered free cash flow to enterprise value ratio ... 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

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  8. Chart Advisor

    Invest in Japan with this ETF

    The Japanese stock market has been front and center in the minds of many international traders over the past few weeks — and for good reason.
  9. Charts & Patterns

    How to Analyze Pharma Stock Fundamentals

    What you need to know about analyzing the fundamentals of pharma stocks.
  10. Chart Advisor

    Bullish Traders Are Turning To Rare Earth Metals

    Companies that explore and or process rare metals are of specific interest to traders because of strong moves in a couple of the sector’s key players.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center