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How do we identify a rounded bottom pattern?

Rounded Bottom:

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

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:


rounding bottoms

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.


round 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.
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Email: gunavathy23@gmail.com
PostBy: Guna
Date: 7/9/2018 4:13:00 PM
Comment: Nice article about Rounded bottom chart pattern. Thank you Enirch.
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