Study the rounding bottom as a defined sequence of swings, then record both confirmed and failed exits with the same rules.
Identify the swings and the boundary
A rounding bottom changes from a decline into a broad, relatively flat low area and then a gradual rise. It is a smooth transition in the direction of swings rather than a sharp V. A left-hand reaction high supplies the reference rim used in this worked example.
Read the formation in its preceding trend
The reversal interpretation begins with a decline and can take considerable time. Do not fit a curve after a rally and assume the base could have been recognized at its lowest point. Record when rising lows and then reclaimed highs became visible.
Use an explicit confirmation rule
This lesson defines confirmation as a close above the left rim at 60. That explicit boundary makes the example testable; the curvature itself is subjective. Different rim definitions create different samples and should be stated before comparison.
| Measure | Value |
|---|---|
| Confirmation session (first bar is session 1) | 57 |
| Boundary | 60.00 |
| Confirming close | 61.00 |
| Formation extreme | 44.00 |
| Formation height | 16.00 |
| Geometric objective | 76.00 |
Height = |44.00 − 60.00| = 16.00
Objective = 60.00 + 16.00 = 76.00The objective illustrates a measuring convention. It supplies no probability, expected return or evidence that a trade reaches that price. Keep the projected level separate from the actual chart observations and from a written risk plan.
Compare volume on the same daily basis
Compare each swing and the confirming session with this stock’s own daily volume. Quiet activity around a base and expansion on an exit are conventional context, but they do not establish direction or identify who traded. An event can dominate a single volume bar.
| Measure | Value |
|---|---|
| Confirmation volume | 220.00 |
| 20-session average including confirmation | 107.45 |
| Relative volume | 2.05× |
Including the current session in the average differs from dividing by the prior 20 sessions. An intraday comparison at the same clock time uses another denominator. State which one you use before comparing examples.
An exit that does not persist
The second chart recovers the rim temporarily, then loses the base and breaks its low. A long transition can still unwind. A rounded appearance is not a substitute for observing what price does at the selected boundary.
Distinguish nearby formations
A cup and handle includes a separate short pullback after the rim recovery. An inverse head and shoulders uses three distinct troughs. A V-bottom reverses sharply without a broad floor.
Keep a reproducible research record
Apply the same swing definition and boundary rule to every chart in a sample. Formations become visible as later bars confirm swings, so preserve the date on which each observation was knowable.
- Record the preceding trend, candle interval, price scale and corporate-action basis.
- Label the swings and write a boundary rule before viewing the later path.
- Record the confirming close, subsequent retest and the price that invalidates the premise.
- Compare volume on a named denominator and retain failed exits as well as resolving examples.
- Review earnings and other events, execution costs and gap risk separately from the geometric drawing.
These formations are studied by reading charts. A list of stocks near a high or low does not identify this pattern.
Sources
- Edwards, Magee and Bassetti, Technical Analysis of Stock Trends, 11th edition: reversal formations and measurement conventions
- StockCharts ChartSchool: Rounding bottom (checked October 1, 2026)
Read our data and methodology notes for calculation context. This guide explains research tools and observations. It does not recommend a trade or investment.