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How To Trade a Rounding Top Pattern
Updated
What Is a Rounding Top?
A rounding top is a price pattern used in technical analysis. It is identified by daily price movements, in particular the tops, which when graphed form a downward sloping curve. Technical analysis of price information suggests that a rounding top may form at the end of an extended upward trend and that this price pattern may indicate a reversal in the long-term price movement. The pattern can develop over several days, weeks, months or even years, with longer time frames to completion forecasting longer changes in trend.
Understanding the Rounding Top Pattern
A rounding top pattern may also be referred to as an inverse saucer pattern. It is similar to, and may occur coincidentally with, a double top or triple top price pattern. The main point of recognizing the pattern is to anticipate a significant change in trend from upward trending prices to downward trending prices. Recognizing this kind of a change can allow traders to take profits and protect themselves from buying into an unfavorable market, or strategize to make money from falling prices by short-selling. The rounding top pattern has three main components: first, a rounding shape where prices trend higher, taper off, and trend lower; second, an inverted volume pattern (high on either end, lower in the middle of the pattern); third, the support price level found at the base of the pattern.
A rounding top is a price pattern used in technical analysis. It is identified by daily price movements, in particular the tops, which when graphed form a downward sloping curve. Technical analysis of price information suggests that a rounding top may form at the end of an extended upward trend and that this price pattern may indicate a reversal in the long-term price movement. The pattern can develop over several days, weeks, months or even years, with longer time frames to completion forecasting longer changes in trend.
Understanding the Rounding Top Pattern
A rounding top pattern may also be referred to as an inverse saucer pattern. It is similar to, and may occur coincidentally with, a double top or triple top price pattern. The main point of recognizing the pattern is to anticipate a significant change in trend from upward trending prices to downward trending prices. Recognizing this kind of a change can allow traders to take profits and protect themselves from buying into an unfavorable market, or strategize to make money from falling prices by short-selling. The rounding top pattern has three main components: first, a rounding shape where prices trend higher, taper off, and trend lower; second, an inverted volume pattern (high on either end, lower in the middle of the pattern); third, the support price level found at the base of the pattern.
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