✅
A rounding top is a bearish reversal chart pattern.
How do you recognise it?
Several features help you identify a rounding top:
- An uptrend before the pattern appears
- The trend gradually slows and price starts to stagnate
- Price then begins falling again until it breaks below the neckline
- Together, these movements form a rounded, upside-down U
How do you trade a rounding top?
You can enter short on the break below the neckline.
The stop-loss can go above the pattern's most recent high.
For the take-profit, measure the distance from the top of the pattern to the neckline, then project it below the breakout point.
How is it different from a rounding bottom?
A rounding bottom is the opposite of a rounding top.
It appears after a downtrend, forms a rounded low and signals a bullish reversal.
The way it develops and how you trade it are similar, but in the opposite direction.
How is it different from an inverse cup and handle?
- An inverse cup and handle is a continuation pattern, while a rounding top is a reversal pattern
- With an inverse cup and handle, price forms a handle after breaking the neckline, unlike a rounding top
