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The Rounding Bottom
The Rounding Bottom is a long-termreversal pattern that is best suited for weekly charts. It is also referred toas a saucer bottom, and represents a long consolidation period that turns froma bearish bias to a bullish bias.

Prior Trend: In order to be areversal pattern, there must be a prior trend to reverse. Ideally, the low of arounding bottom will mark a new low or reaction low. In practice, there areoccasions when the low is recorded many months earlier and the security tradesflat before forming the pattern. When the rounding bottom does finally form,its low may not be the lowest low of the last few months.
Decline: The first portion of therounding bottom is the decline that leads to the low of the pattern. This declinecan take on different forms: some are quite jagged with a number of reactionhighs and lows, while others trade lower in a more linear fashion.
Low: The low of the roundingbottom can resemble a “V” bottom, but should not be too sharp and should take afew weeks to form. Because prices are in a long-term decline, the possibilityof a selling climax exists that could create a lower spike.
Advance: The advance off of thelows forms the right half of the pattern and should take about the same amountof time as the prior decline. If the advance is too sharp, then the validity ofa rounding bottom may be in question.
Breakout: Bullish confirmationcomes when the pattern breaks above the reaction high that marked the beginningof the decline at the start of the pattern. As with most resistance breakouts,this level can become support. However, rounding bottoms represent long-termreversal and this new support level may not be that significant.
Volume: In an ideal pattern,volume levels will track the shape of the rounding bottom: high at thebeginning of the decline, low at the end of the decline and rising during theadvance. Volume levels are not too important on the decline, but there shouldbe an increase in volume on the advance and preferably on the breakout.
A rounding bottom could be thoughtof as a head and shoulders bottom without readily identifiable shoulders. Thehead represents the low and is fairly central to the pattern. The volume levelsthroughout the pattern mimic those of the head and shoulders bottom;confirmation comes with a resistance breakout. While symmetry is preferable onthe rounding bottom, the left and right side do not have to be equal in time orslope. The important thing is to capture the essence of the pattern.
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