How the Rounding Bottom Pattern Works

 

Rounding bottom pattern sometimes knows as a “saucer bottom” pattern, is known for being able to predict long term upward trend. Very similar to the out of the money  only without the bother of a temporary downward trend that makes up the “handle.” The pattern is a  long-term reversal pattern that is best applied to weekly charts, representing a consolidation.

That turns from bearish to bullish.This rounding bottom pattern can be spotted at the end of depressingly long downward trends. The timeframe for this pattern can be weeks, months, or even years in length and is considered to be one of the more rarified patterns to form in the marketplace.  rounding top formation Most of the time, this pattern indicates that the long downward trend, often caused by an excess of stock supplies, is coming to an end as investors start to buy in at low price points reversing the downward movement. Once this starts, it typically increases demand and pushes up the stock price.

This allows the stock to “break out” and begin a long-lasting and positive reversal that investors can take advantage of if they choose to be one of those who buy low and are willing to sit on the stock for a while until it tops out again. collar vs bull spread This is because the length of time for recovery can be varied, and may take a long time to find its peak. Investors should prepare for this lengthy-time period and have patience while the price continues to build.

Understanding the Rounding Bottom Pattern

the rounding bottom pattern looks very similar to the cup and handle pattern, but without the brief downward trends represented by the handle. call buy and call sell The initial declining slope of a rounding bottom indicates that there is too much supply coming on the market, which pushes the stock or index down. Here traders start to realize the stock is trading at a discount, and buyers begin to enter the market at the discounted price. This increase in demand then pushes the stock higher as demand continues to increase.

As the rounding bottom completes its formation, the stock breaks out into a full bullish pattern. butterfly option strategy pdf The whole process is an indication of a change in sediment by investors from bearish to bullish, which increase momentum upwards. Although the pattern has a high success rate, it is significantly rarer than other technical analysis charts.


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