A long-term bullish reversal pattern where the price gradually curves from a downtrend into an uptrend, forming a smooth U-shape over weeks or months.
What Is a Rounding Bottom?
A rounding bottom (also called a saucer bottom) is a long-term bullish reversal pattern. The price gradually transitions from a Downtrend to an Uptrend, creating a smooth, rounded U-shape on the chart. Unlike a sharp V-bottom, the rounding bottom shows a slow and steady shift in sentiment from bearish to neutral to bullish.
Formation Characteristics
The left side of the rounding bottom shows declining prices with decreasing volume. The center (the bowl) shows stabilization at low prices. The right side shows gradually rising prices with increasing volume. The pattern can take weeks to months to fully form on a daily chart.
On GBP/USD, a rounding bottom on the weekly chart is a major reversal signal, often preceding a multi-month rally.
How to Trade It
The pattern confirms when price breaks above the Resistance level formed by the left edge of the rounding bottom (where the decline began). Enter long on this breakout. The target is the depth of the rounding bottom projected upward from the breakout point.
Because the pattern develops slowly, early entry is possible if you can identify the right side of the U forming. Look for increasing volume and higher lows as the price curves upward. However, the breakout above the rim provides the cleanest confirmation. The pattern often includes a brief pullback after the breakout, which gives a second entry opportunity.
Related Terms
Cup and Handle
A bullish continuation pattern resembling a teacup: a rounded bottom (cup) followed by a small downward drift (handle). The breakout above the cup's rim confirms the pattern.
Double Bottom
A bullish reversal pattern where the price reaches the same low twice with a bounce in between, forming a "W" shape. The break above the middle peak confirms the reversal.
Inverse Head and Shoulders
A bullish reversal chart pattern with three troughs where the middle trough (head) is the lowest. The neckline break above confirms the reversal from a downtrend.
Accumulation
A sideways price phase where informed buyers gradually build positions before a major upward move. It appears as a range or base after a decline.
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