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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Chart Patterns: After the Buy
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Bulkowski's Rounding Bottoms

Class Elliott Wave Fundamentals Psychology Quiz Research Setups Software Tutorials More...
Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 09/29/2016
18,143 -195.79 -1.1%
7,985 -20.08 -0.3%
673 -10.02 -1.5%
5,269 -49.40 -0.9%
2,151 -20.24 -0.9%
YTD
4.1%
6.3%
16.5%
5.2%
5.2%
Tom's Targets    Overview: 09/15/2016
17,800 or 18,600 by 10/01/2016
8,275 or 7,500 by 10/01/2016
710 or 650 by 10/01/2016
5,400 or 5,100 by 10/01/2016
2,080 or 2,225 by 10/01/2016

Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 595 to 607.

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Rounding bottoms are chart patterns that are difficult to spot unless you look on the weekly scale. The break even performance rank is small and the average rise is large, so they show good performance.

Be careful midway through the turn since price sometimes shoots up only to drop back down.

Rounding bottom chart pattern
Rounding bottom chart pattern

 

Rounding Bottom: Important Bull Market Results

Overall performance rank (1 is best): 5 out of 23
Break even failure rate: 5%
Average rise: 43%
Throwback rate: 40%
Percentage meeting price target: 57%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Rounding Bottom: Identification Guidelines

CharacteristicDiscussion
Weekly or dailyThe pattern appears on either the daily or weekly chart. Concentrate on finding them on the weekly scale because the rounded nature is more apparent.
Price trendPrice trends upward to the pattern 62% of the time.
ShapeLook for a rounded bowl shape, usually over many months and usually after an upward price trend.
BumpPrice may shoot up midway through the turn, near the bottom, but price usually retraces most (not all) of the way back to where it started. The Bump figure to the right shows an example as does the figure at the bottom of this page.
VolumeThe volume pattern mimics the price action – a curving trend, appearing most often as a dome (51%, U-shaped: 43%, random shape: 6%). The trend is upward 51% of the time.
ConfirmationThe pattern confirms when price closes above the highest peak the pattern, either the left or right saucer lip (if it has one).

A bump in a rounding bottom chart pattern

Bump

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Rounding Bottom: Trading Tips

Consult the associated figure on the right.

Trading TacticExplanation
Measure ruleCompute the height from the right saucer lip to the lowest valley in the pattern then multiply it by the above “percentage meeting price target.” Add the difference to the right saucer lip to get a price target. If the saucer doesn't have a right lip then use the left rim. The Measure Rule figure to the right uses the left lip (A) to the lowest valley (B) as the height.
SwingersSwing traders can sell if price bumps up midway through the rounding turn. Buy back in once price retraces back to near the price at which the bump started. Price usually re-enters the rounding turn higher than the launch price.
PausePrice often pauses at the price level of the left saucer lip.
HandleIf the turn forms a handle at the right saucer lip, draw a trendline from the left lip to the right and extended downward beyond the handle. Buy when price closes above the trendline. The Handle figure to the right shows this situation. The red line is the trendline connecting the left rim to the right rim and extended downward.
Flat baseA flat base (predominantly flat over several months) leading to the rounding turn often leads to a powerful rally. The Flat Base figure to the right shows an example.
Yearly highPatterns that breakout within a third of the yearly high perform best.
ThrowbacksThrowbacks hurt post breakout performance.

Rounding bottom measure rule

The Measure Rule

Rounding bottom handle

Handle

Flat Base

Flat Base

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Rounding Bottom: Examples

Rounding bottom chart pattern example

The above figure shows an example of a rounding bottom chart pattern. I selected this one to show you an example of what the bump looks like that sometimes appears near the midpoint of the turn. The bump begins at C and rises to A, which is taller than usual. Then price drops back to near the launch price, B, before resuming the rounding turn.

Rounding bottom chart pattern example in Encore Wire (WIRE)

This is another example, and a more recent one, of a rounding turn. The bump up begins near the middle of the rounding turn and ends near the same price at which it took off.

Rounding bottom chart pattern example in Steelcase (SCS)

This example shows Steelcase (SCS) on the daily scale. The chart is a bit compressed vertically, so the turn is not as rounded as it looks on my computer screen.

This chart is an excellent example of the mid-turn bump-up in price. I show that circled in green beginning from the launch price of A to B. Notice that B almost makes it back down to A before the uptrend resumes.

-- Thomas Bulkowski

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Other Rounding Bottom Examples

See Also

Written by and copyright © 2005-2016 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Forget about world peace. Visualize using your turn signal.