A round top has three important characteristics:
- A sudden uptrend
- A consolidation phase
If a stock satisfies these conditions and looks like this chart, it is called a round top pattern. This pattern mostly works in larger timeframes. Works much better for positional trades. But this particular trade was a intraday trade as you can see ideal entry would be to short as soon as the breakdown from the consolidation zone is clear, the Stop Loss will be the resistance in the consolidation zone and Target will be the point where the sudden upmove started.
My trade on this was:
- SOLD at 665.5 after confirmation of breakdown.
- EXITED at 657 since i dont take my intraday trades after 3.00PM.
A good chunk of 8.5 points. All with a very high risk:reward ratio of 1:5.
So now you know what to do when you spot a Round top next time ;) Don't you?