Rounding Top

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.

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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 >>
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    Technical analysis claims the ability to forecast future movements of financial instruments, such as stocks or commodities, ... Read Full Answer >>
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