Rounded bottom, also known as bowl, saucer or rounding turn pattern, is a bullish trend reversal chart pattern indicating the end of an existing downtrend and the start of a new uptrend. It is an elongated U-shaped formation with reasonably smooth and rounded bottom without any major spikes. Rounded bottom pattern shows the consolidation of the trend and a gradual shift from bearish trend to bullish trend; thus this is better suited for long-term traders.
Volume changes are also important with rounded bottom chart pattern. The volume should correspond to the price pattern; that is, volume should decrease when price decreases, and increase when price increases. The duration of the pattern can be from just a few weeks to many months. The longer the pattern takes to form, the more reliable it is.
With rounded bottom formation, traders can go long when the breakout is confirmed. The breakout can be either the price where the price crosses above its moving average or where its crosses above the starting price of the pattern; the first one is more used and more reliable. The reliability and the bullishness of the pattern are greatly challenged when the formation does not have a smooth rounded shape or when the price crosses below its moving average.
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