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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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Bulkowski's Rounding Top

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Busted
Patterns
Candles Chart
Patterns
Event
Patterns
Small Patterns
Market
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 03/27/2017
20,551 -45.74 -0.2%
8,935 6.33 0.1%
702 -3.50 -0.5%
5,840 11.63 0.2%
2,342 -2.39 -0.1%
YTD
4.0%
-1.2%
6.5%
8.5%
4.6%
Tom's Targets    Overview: 03/14/2017
20,100 or 21,250 by 04/15/2017
8,500 or 9,500 by 04/15/2017
675 or 715 by 04/01/2017
5,950 or 5,650 by 04/15/2017
2,275 or 2,425 by 04/15/2017
Mutt Losers: None YTD
Mutt Winners: None YTD

Written by and copyright © 2005-2017 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 608 to 623.

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Rounding tops are mediocre performers except for downward breakouts in a bull market. Even so, the break even failure rate is quite high and the average decline is just about average. Upward breakouts have a poor average rise but the failure rate is acceptable.

Rounding top chart pattern
Rounding Top Chart Pattern

 

Rounding Top: Important Bull Market Results

Overall performance rank for up/down breakouts (1 is best): 13 out of 23; 5 out of 21
Break even failure rate for up/down breakouts: 9%; 12%
Average rise/decline: 37%; 19%
Throwback/pullback rate: 53%; 48%
Percentage meeting price target for up/down breakouts: 61%; 24%

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

Rounding Top: Identification Guidelines

CharacteristicDiscussion
Weekly or dailyRounding tops are large enough to appear on the weekly or daily chart.
Price trendUpward leading to the chart pattern.
Even endsThe rims of the inverted bowl bottom near the same price. 52% of the time the end is slightly higher than the start.
Rounded turnPrices form a gentle curve, a half moon shape.
VolumeVolume is higher at either end of the pattern often giving volume a rounded, U-shaped, appearance.
BreakoutA close above the highest high signals an upward breakout. Downward breakouts are a close below the right rim low.
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Rounding Top: Trading Tips

Trading TacticExplanation
Measure ruleCompute the height from the highest peak in the pattern (point A in the Measure Rule figure to the right) to the right rim low (B) and then multiply it by the above “percentage meeting price target.” Add it to the price of the highest peak (A, upward breakouts) or subtract it from the right rim low (B, downward breakouts) to get a target price (C).
32% retraceFor aggressive traders, if price retraces 32% of the rounding top's height, buy. The Retrace figure to the right shows an example. Measure the height from A to B and then take 32% of this. Add it to the low at B to get a target of C. C represents the buy price.
SupportThe two rims are support areas.
HeightTall patterns perform better than short ones.
Volume shapePatterns with U-shaped volume outperform.
Breakout volumeHeavy breakout volume suggests better performance.
Right rimWhen the right rim is above the left, the pattern outperforms. The Retrace figure to the upper right shows an example, with the right bottom (B) above the left (D).
Yearly lowPerforms slightly better when the breakout is within a third of the yearly low.
GapsBreakout day gaps tend to push price further than do breakouts with no gaps.
Throwbacks and pullbacksThrowbacks and pullbacks hurt post breakout performance.
Rounding top measure rule
The Measure Rule

Rounding top retrace

Retrace

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Rounding Top: Example

Rounding top chart pattern example

The above figure shows an example of a rounding top chart pattern. Price bottoms at the start, A, climbs to the top at B, and then rounds down to C. In this example, when price rises above the 32% retrace buy point, it signals a purchase. That signal worked well here.

-- Thomas Bulkowski

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See Also

Written by and copyright © 2005-2017 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. The gene pool could use a little chlorine.