Hello Traders,
Hope you are doing good… I am sure you are already loving our blogs and some ideas 💡 which I have recently shared…
In today’s blog you will see one more chart pattern getting developed and the underlying opportunity therein…
Rounding Bottom Pattern
Stock Name : Intellect Design CMP 546
The stock is down by almost 50% from its peak 986 hit in the month of April 2022
And it has also hit the low of 389 in the month of 388 in March 2023. At 389 the stock was down by almost 60%
The current run-up from 389 to 546 indicating that the stock is coming out of woods. The chart below indicates there is a rounding Bottom getting formed and the stock has recently tested the 23.60% retracement of the fall from 986 to 389.
38.20% retracement level being placed at 615 will be the next level for the stock to play out.
And in 3-6 months time the stock may test 755 which is 61.80% retracement
What Is a Rounding Bottom?
A rounding bottom is a chart pattern used in technical analysis and is identified by a series of price movements that graphically form the shape of a “U”. Rounding bottoms are found at the end of extended downward trends and signify a reversal in long-term price movements. This pattern’s time frame can vary from several weeks to several months and is deemed by many traders as a rare occurrence. Ideally, volume and price will move in tandem, where volume confirms the price action as per investopedia.
Structure of A rounding bottom Pattern
The chart can be divided into several main areas, the prior trend shows the buildup to the stock’s initial descent toward its low. Picturesquely, the trading volume would be the heaviest at the start of the decline and then would decrease as the share price levels off and approaches the bottom of the pattern formation. As the stock recovers and moves to complete the pattern, volume increases as investors buy shares again. The rounding bottom breaks out of its low point when the stock price closes above the price immediately prior to the start of the initial decline.
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