Rounding Bottom Pattern

Rounding Bottom Basic Pattern

How to recognize a Rounding Bottom?

The rounding bottom, - also called a saucer bottom - is a bullish reversal pattern within the field of technical analysis.

The pattern is preceded by an extended bearish trend. The rounding bottom contains the absolute low and the pattern itself is the actual 'bottoming out'-process that takes at least weeks and sometimes even months.

During the period necessary to complete the pattern, volatility and momentum decrease. The low prices are noticed by bargain hunters who begin to pick up stocks by dribs and drabs.

Rounding Bottom Basic Pattern

Trading volume in the Rounding Bottom Chart Pattern

The volume in the rounding bottom sometimes gives interesting clues about the investor sentiment at play during the formation of this pattern.

During the initial decline at the beginning of the pattern, the selling volume will still be relatively high with a few real outliers at times. These are, as it were, the last buyers to be shaken out of the market and to throw in the towel due to ever lower prices.

In the following period the volume, together with the momentum, goes down. The price may still drop a bit, but at a much slower pace, and the selling volume also decreases further.

Eventually a price bottom forms in the pattern itself. After this, new buyers enter the market and volume will again increase slightly.

Rounding Bottom volume

Rounding Bottom Breakout

The pattern is complete as soon as more buyers enter the market and drive the price up further, revealing a clear breakout. In many cases you will recognize this break-out by a pronounced bullish candle which is accompanied by noticeably higher volume.

The breakout is the entry signal for swing traders to open long positions, assuming that this is the beginning of a new upward trend.

Rounding Bottom volume

Other technical patterns within the Rounding Bottom Chart Pattern

The rounding bottom pattern is actually the umbrella term for several other patterns which can all form within this widely spaced out bottom pattern.

Rounding Bottom with cup and handle Rounding Bottom with inverted head and shoulders

Thus, you will regularly recognize triangles, double or triple bottoms, cup and handles or even inverted head and shoulders patterns that are part of this pattern.

The ChartMill Team

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