The rounding bottom (also known as a saucer pattern) is a long-term bullish reversal formation characterised by a gradual, U-shaped transition from a downtrend to an uptrend. The pattern reflects a slow shift in sentiment from bearish to neutral to bullish, typically forming over weeks or months. A breakout above the pattern's resistance (the left rim level) confirms the reversal.
Gradual U-shaped curve rather than a sharp V-bottom. Volume typically mirrors the pattern: declining on the left side, rising on the right. Resistance at the rim level (the high point where the initial decline began). Duration is usually extended, making this a higher-timeframe pattern. Can include a brief handle or consolidation near the rim before breakout.
Enter on a confirmed breakout above the rim resistance level with expanding volume. Look for increasing momentum on the right side of the saucer as buying pressure builds. An aggressive entry is possible at the midpoint of the right side when volume begins to expand. Wait for a retest of the rim as new support for a conservative entry.
Measured-move target equals the depth of the saucer projected upward from the breakout point. Place stops below the most recent swing low on the right side of the pattern. Trail with a rising moving average such as the 20 EMA or 50 SMA. Exit if the breakout fails and price closes back below the rim.
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Rounding bottoms are long-term patterns best suited for position traders and swing traders. The volume profile is a crucial confirmation — a rounding bottom without the characteristic volume U-shape may not be a valid pattern. These patterns tend to produce sustained trends once confirmed, making them ideal for pyramiding strategies.
Diamond patterns are relatively rare reversal formations that combine a broadening pattern followed by a symmetrical triangle, creating a diamond-shaped outline on the chart. They typically appear at market tops (diamond top) or, less commonly, at bottoms (diamond bottom). The pattern signals an exhaustion of trend momentum as volatility first expands then contracts before a decisive breakout.
The head and shoulders is one of the most reliable reversal patterns in technical analysis. It consists of three peaks — a higher central peak (the head) flanked by two lower peaks (the shoulders) — connected by a neckline drawn across the reaction lows. A break below the neckline confirms the reversal, with the measured target equal to the distance from the head to the neckline projected downward from the breakout point.
Triple tops and triple bottoms are reversal patterns where price tests the same level three times before reversing. They are essentially double tops and bottoms with an additional test, making them rarer but potentially more significant. The three-touch structure confirms that a price level is acting as a strong barrier, and the eventual break of the pattern's support or resistance level triggers the reversal.
Broadening patterns, also called megaphone or expanding patterns, form when price creates progressively higher highs and lower lows, diverging rather than converging. These patterns reflect increasing volatility and disagreement between buyers and sellers, often appearing during periods of uncertainty or at major market turning points. Broadening patterns are among the most challenging formations to trade because they lack the contracting structure of typical chart patterns.