Rounding tops and bottoms
Rounding tops and bottoms are reversal patterns, another name for them is saucer tops or bottoms. These are typically long in duration.
Rounding bottoms
The pattern itself represents a long consolidation period where the swing from bears to bulls takes time to develop. There needs to be a downtrend initially, the first part is the decline – this can be jagged or smooth. The bottom should not be too sharp but a small V shape may form here. The advance should take about the same duration as the decline. The confirmation comes when resistance created at the start of the pattern is broken. This type of price pattern is more subjective than other price patterns and therefore it’s one for more experienced traders to try to identify.
Rounding tops
These are the inverse to the rounding bottom.
Trading these patterns
Traders are looking to profit from the trend after the pattern completes.
- Price target for rounding bottoms: the take profit level is set by projecting the height of the pattern, up above the breakout from resistance.
- Price target for rounding tops: the take profit level is set by projecting the height of the pattern, down below the breakout from support.
- Stop loss for rounding bottoms can be set below the resistance level.
- Stop loss for rounding tops can be set above the support level.
Let’s show you a rounding bottom in weekly Gold, this was a very deep pattern.
- Rounding tops and bottoms require a long duration for the consolidation to form.
- Rounding tops are confirmed when the price breaks through the support level.
- Rounding bottoms are confirmed when the price breaks through the resistance level.
