Rounding Bottom Saucer Pattern in Trading with Examples

Learn how to identify and trade the Rounding Bottom Saucer pattern with real examples.

 Dear readers, we greet you all with respect. Financial markets promise each of us unique profit opportunities with their wide range of offerings. Whether you prefer long-term or short-term trading, financial markets pave a path that suits everyone's goals. In this process, by using fundamental and technical analysis tools, we can grow our financial assets and take steps toward financial freedom. Chart patterns used in technical analysis are key tools in taking advantage of these opportunities. Chart patterns allow us to clearly understand market movements and take positions at the most opportune times. One such pattern is the Rounding Bottom Saucer pattern, which we will now discuss. In this article, we will provide a straightforward overview of what the Rounding Bottom Saucer pattern is, how to identify it, and how it can be used in financial trading.


What is the Rounding Bottom Saucer Pattern?

I believe you now have some knowledge about reversal patterns. We can include the Rounding Bottom Saucer pattern among these types of patterns as well. The Rounding Bottom Saucer pattern is usually seen at the end of a downtrend and is a reversal pattern. We can also refer to this pattern as a "bullish reversal pattern" because it forms after a downtrend and leads to a trend change, initiating an uptrend. It has a very simple and understandable structure on the price chart. In fact, it can be considered one of the simplest patterns. The name of the pattern comes from the shape that forms on the price chart, resembling a saucer or bowl. Prices start in a downtrend, form a bottom, and then recover, beginning an uptrend. This price movement creates a visual similar to the rounded base and upwardly widening sides of a bowl. The saucer or bowl analogy effectively explains the curvature and gradual reversal process of this pattern. The Rounding Bottom Bowl pattern indicates that the downtrend has ended and that prices are slowly beginning to recover.

This image displays a Rounding Bottom Saucer pattern, which signals a bullish reversal.
The Rounding Bottom Pattern

Note: While you may encounter the Rounding Bottom Saucer pattern on a price chart, you might also see the Rounding Top Saucer pattern. The Rounding Bottom pattern forms after a downtrend and signals the beginning of an uptrend, whereas the Rounding Top pattern indicates that an uptrend may be followed by a downtrend. To explain simply:

The Rounding Bottom pattern is a chart formation where prices first decline, then form a bottom, recover, and finally rise with an upward movement. In contrast, the Rounding Top pattern is a structure where prices first rise and form a peak, then undergo a correction, and ultimately begin a downtrend. Understanding the differences between these two patterns is crucial for exactly analyzing market trends and shaping your trading decisions accordingly.


The Main Features of the Rounding Bottom Saucer(Bowl) Pattern

The Rounding Bottom Saucer (Bowl) pattern forms a rounded bottom resembling a bowl. Prices first move in a downtrend, then follow a horizontal path, and lastly recover with an upward trend. The creation of a soft and rounded shape that resembles a bowl from price movements is a basic feature of this pattern. This shape develops through specific stages, and each stage represents a particular behavior of the prices. Here are the main features of the pattern formed through this process:

Left Side of the Saucer: The beginning of the pattern normally starts with a pronounced downtrend. Negative news in the market, weak economic indicators, or poor performance by a company can contribute to this decline. During this period, the market experiences a phase where sellers are dominant, with supply exceeding demand. Prices drop gradually or sometimes rapidly during this downturn. This decline period forms the left side of the bowl, which is one of the basic features of the pattern.

Bottom of the Saucer: When prices reach a certain level, a period begins where the balance between supply and demand is established, meaning the price no longer declines further. During this period, prices usually move in a narrow range, following a horizontal trend. Price fluctuations may be very low, and the market may remain indecisive for a while. This stage forms the bottom of the bowl, which is another feature of the pattern.

Right Side of the Saucer: After reaching the bottom of the bowl, prices begin to rise again. Prices usually increase gradually, similar to the decline during the downtrend. This rise is often triggered by a positive change in the market or improved expectations. As a result, the right side of the bowl in the pattern is formed. The right side of the bowl often mirrors the left side symmetrically. Sometimes, even if it is not perfectly symmetrical, it rises with a similar slope.

Neckline: In the structure of the pattern, the rounded part of the bowl is an important component that stands out and is one of the primary features of the pattern. This roundness enhances the prominence of the Rounding Bottom pattern and makes the overall trend of price movements clearer. The imaginary line that connects the high level where the bowl's roundness begins with the high level where the roundness is about to end is called the "neckline." This line, which connects the two highest points of the bowl, marks the completion point of the Rounding Bottom pattern.

The Rounding Bottom pattern is not always perfectly symmetrical. The slopes, durations, and price movements of the left and right sides may vary. Additionally, the formation of the Rounding Bottom pattern can take days or even weeks. Its long-term nature reflects the broader, long-term trends in the market. All these features explain why the Rounding Bottom pattern is considered a reversal pattern. The downtrend gradually comes to a halt, the market reaches equilibrium, and then a new uptrend begins. This indicates that the market has recovered from the bottom and is in the process of reaching a new peak, as observed.


How to Trade the Rounding Bottom Pattern?

The Rounding Bottom pattern is not frequently seen on price charts because it signals long-term trend changes. This pattern indicates the end of a downtrend and the impending start of a new uptrend. For anyone trading in the market, this is a trend reversal signal that should not be missed. It is often considered a buy signal, and buying may be preferred when the neckline is broken. However, it cannot be ignored that this pattern has a long-term structure and takes time to form. Therefore, it should be monitored carefully. The buy signal commonly occurs with the break of the neckline in the Rounding Bottom pattern. A more secure strategy is to wait for a pullback after the break and see if the price tests the neckline. When the price tests this level as support and then moves upward again, it often provides a stronger buy signal.

  • Buying: You can buy when the neckline is broken or after the break has been confirmed.
  • Stop Loss: The stop loss level may need to be set wider in a volatile market. In this case, the stop loss order should be placed below the lowest point of the rounded bowl. In a less volatile market, placing the stop loss just below the neckline after the break would be more appropriate.
  • Target: The initial profit target is set at the same distance above the bowl's depth. This distance is calculated by measuring from the lowest point of the bowl (saucer) to the neckline and then adding this distance above the breakout point. This provides an estimate of how high the price could rise after the formation is complete.

The chart below depicts an example of the Rounding Bottom pattern trade in the smallest detail. You can clearly see this pattern on the chart of the USD/CAD currency pair. Formed at the end of a downtrend, this pattern led to a clear reversal in the market. After the neckline was broken, the expected uptrend began, and prices exhibited an upward movement. This example illustrates how the Rounding Bottom pattern can be a powerful signal source for traders.

Rounding Bottom pattern in USD/CAD indicates a bullish reversal.
Rounding Bottom Signals Bullish Reversal in USD/CAD

What you need to know: The information presented here is intended to provide a general overview of the topic and does not constitute investment advice. You may need to seek professional guidance to make decisions suited to your personal financial situation. Financial markets always carry risks, and patterns alone do not guarantee definitive results. Technical analysis tools like the Rounding Bottom pattern should be used to support trading decisions, but it is important to always consider market conditions and other analytical methods as well.

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