A Rounded Bottom is considered a bullish signal, indicating a possible reversal of the current downtrend to a new uptrend.
Rounded Bottoms are elongated and U-shaped, and are sometimes referred to as rounding turns, bowls or saucers. The pattern is confirmed when the price breaks out above its moving average.
Following are important characteristic to look for in a Rounded Bottom.
The price pattern forms a gradual bowl shape. There should be an obvious bottom to the bowl. Price can fluctuate or be linear; however, the overall curve should be smooth and regular, without obvious spikes. For example, a V-shaped turn would not be considered a rounded bottom.
Rounded Bottoms are long-term patterns. Martin J. Pring identifies that the pattern can occur over a period of about 3 weeks, but can also be observed over several years.
The duration of the pattern indicates the significance of the price movement. John J. Murphy writes that rounded bottoms "are usually spotted on weekly or monthly charts that span several years. The longer they last, the more significant they become."
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