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Rounding Bottom Reversal Pattern

Discussion in 'Forex Discussions' started by painofhell, Feb 24, 2016.

  1. painofhell

    painofhell Content Contributor

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    What is the Rounding Bottom Reversal Pattern?
    The Rounding Bottom Reversal Pattern, or the Saucer Bottom chart pattern is a long-term reversal pattern. This technical analysis pattern usually looks like a curve that represents a lengthy consolidation period, and changes into a bullish bias from a bearish bias. This Forex pattern is generally found on weekly charts.

    Different Parts of the Rounding Bottom Reversal Pattern.

    • Prior Trend. There must be a prior downtrend for the Rounding Bottom pattern to form. However, the low of the pattern may not be the lowest of the last few months, as the trend line, after forming a record low, may move horizontally for some time before forming a rounding bottom pattern.

    • Decline. The trend line declines to the lowest point of the pattern in a linear fashion, or in a jagged movement with a couple of reaction highs and lows.

    • Low. The lower part should resemble a “V” shape. However, the part shouldn’t be too sharp. This phase requires a few weeks to develop.

    • Advance. The trend line advances from the lows during the right half of the pattern in a similar fashion to the prior decline. If the prices incline to sharply, the pattern becomes unreliable.

    • Breakout. The pattern’s final bullish overtone is confirmed when the prices break above the initial reaction highs marked at the beginning of the Rounding Bottom Reversal Pattern. The broken resistance turns into a support, however, an insignificant one, as the pattern usually marks a long-term trend reversal.

    • Volume. The volume declines during the left part of the pattern, however, it begins to increase once the trend starts to advance upwards from the lowest point. The volume should spark when the breakout occurs, and this confirms the pattern.
    Key Notes about the Rounding Bottom Reversal Pattern.

    • The Rounding Bottom Reversal pattern is similar to the head and shoulders bottom reversal pattern, however, it doesn’t have apparent shoulders.

    • The head of the Forex pattern is represented by the lowest point.

    • The pattern confirmation depends on the resistance breakout.

    • Although the left and right halves are preferred to be symmetrical, they don’t have to be exactly equal in slope or time.
     
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