How do we identify a rounded bottom pattern?

What Is a Rounding Bottom?

This is also referred as “saucer” as it resembles a clear inverted “U” image.

A rounding bottom pattern is a technical analysis that indicates the price of an asset or commodity will move in a specific direction. It occurs when the price rises over time but then falls and forms a bottom. A rounding bottom pattern looks like an upside-down U. This pattern is often seen in penny stocks because their prices are highly volatile, making it easy for traders to spot these patterns more easily.

The pattern signals that the existing downtrend is about to finish and the possibility of an uptrend to commence.

This creates an opportunity to go long.

The chart below is an illustration


Enrich Broking: Rounding Bottom Pattern

Number 1: Downtrend

Number 2: Rounded bottom

Number 3: Neckline

Stable movement in price is required for this pattern too.

The movement would be towards downside before stabilizing for a long time and formation of rounded bottom.

Sooner or later, the price rises back above the neckline of the stabilized area.

The pattern finishes at this point.

How do we trade the rounded bottom?

Enter the trade

Observe the neckline marked on the illustration chart below. As soon as the price breaks through and a candle closes above the neckline, long trading can be done. Enter the market with a buy order.

The stop loss is placed above the neckline of the pattern.When the price trades below this point, there is less chance of this pattern’s functionality. It’s better to exit the market.

Profit target: Measure the height of the actual pattern and extending that distance up from the neckline.

The chart below is an illustration of the stop loss and take profit levels.


Enrich Broking: Rounding Bottom

Number 1: Downtrend

Number 2: Rounded bottom

Number 3: Neckline

Number 4: Height of pattern

Number 5: Same distance away from neckline as number 4

1 Long entry

2 Stop loss

3 Take profit

Nut Shell

An overview of the lesson discussed so far….

  • The rounded bottom are reversal patterns which identify the completion of the trend and indicate a possible reversal point on price chart.
  • The rounded bottom signals that the existing downtrend is about to finish and the possibility of an uptrend to commence. It resembles a clear “U” image.
  • Initially, A patterns move in one direction. Then the stabilization of price takes place. There is a price breakout of the neckline in the opposite direction.
  • Enter the market when the neckline of the pattern is broken. Look for candle closes above (for rounded bottom) the neckline.
  • The stop loss is placed below the neckline when trading the rounded bottom.
  • For profit target, the measurement taken involves height of the actual pattern and extending that distance from the break of the neckline.

How a Rounding Bottom Works

A rounding bottom pattern is a technical analysis method that helps predict the price movements in an asset or market. It predicts reversals and supports prices by using a moving average and identifying areas where the average line is lower than the current price.

A rounding bottom pattern forms when the security falls and its price reaches a local low. The rounding bottom is typically followed by a reversal upward in price. When price action rises enough to touch or move very close to the prior high, it can indicate the end of a downward trend and the beginning of an uptrend.

Frequently Asked Questions

Peak Margin-Enrich

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The term "round bottom pattern" refers to a pattern of price movements in which the low of each price movement is higher than the high. This pattern occurs in specific financial markets, most notably those with no apparent support or resistance levels. It is not uncommon for prices to exhibit this pattern during an extended period when trading volume and volatility are relatively low. In general, the round bottom pattern is considered bullish because the last swing low has been above the previous swing high, which suggests that buyers have been able to push prices higher on every move.

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The logic behind the rounding bottom pattern chart breakout pattern is that when the stock price has been in a long-term downtrend, it begins to show signs of bottoming out. If you're familiar with rounding bottom pattern technical analysis, then you'll know that this means the price will soon begin to trend upwards again. The pattern consists of three waves, and after the third wave, there will be a rally. On the other hand, a double rounding bottom pattern is a popular candlestick charting pattern used to identify if a bear market or downtrend has ended. The pattern begins with a long downward movement. This pattern is like the rounded bottom, except it includes two peaks and troughs.

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The rounding bottom pattern has a bullish potential in terms of movement. Suppose you are looking for an indicator that can help you trade rounding bottom pattern target. In that case, you should use moving averages and the support/resistance lines, which will help give you a better idea of when to enter and exit your position. The rounding bottom pattern breakout is formed by the price action of a stock trading around the price support level, then bouncing off it and back up. The pattern is also known as "riding the waves" or "riding the support."

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A rounding bottom pattern is formed when the price breaks out of a range, creating a peak (high) at point one. The price then falls to point two and reverses again towards point one to form a bottom at point three. Point three supports the price, which goes upward, starting a horizontal trend that resembles the letter "W." The rounding bottom pattern breakout occurs in both the uptrend and downtrend and has the same basic formation regardless of technical structure. In the past, many traders have used the double rounding bottom pattern to enter a trade or exit from one.

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There are many ways to measure the potential of a rounding bottom pattern target. One way is by analyzing the volume. A rising volume will strongly indicate that the price will continue to rise and that the market is bullish. Another way to rounding bottom pattern technical analysis is by looking at chart patterns like channel, cup, and handle formations. If you see these formations, then it would be wise to stay away from trading as there might be some changes in momentum soon. A double rounding bottom pattern is very reliable because this type of pattern typically follows other bullish patterns such as triangles and head-and-shoulders patterns.

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