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How the Rounding Bottom Pattern Works

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optionstrategies
How the Rounding Bottom Pattern Works

Rounding bottom pattern sometimes knows as a “saucer bottom” pattern, is known for being able to predict long term upward trend. Very similar to the out of the money  only without the bother of a temporary downward trend that makes up the “handle.” The pattern is a  long-term reversal pattern that is best applied to weekly charts, representing a consolidation.

That turns from bearish to bullish.This rounding bottom pattern can be spotted at the end of depressingly long downward trends. The timeframe for this pattern can be weeks, months, or even years in length and is considered to be one of the more rarified patterns to form in the marketplace.  rounding top formation Most of the time, this pattern indicates that the long downward trend, often caused by an excess of stock supplies, is coming to an end as investors start to buy in at low price points reversing the downward movement. Once this starts, it typically increases demand and pushes up the stock price.

This allows the stock to “break out” and begin a long-lasting and positive reversal that investors can take advantage of if they choose to be one of those who buy low and are willing to sit on the stock for a while until it tops out again. collar vs bull spread This is because the length of time for recovery can be varied, and may take a long time to find its peak. Investors should prepare for this lengthy-time period and have patience while the price continues to build.

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