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What Is a Rounding Top?
A rounding top is a price pattern used in technical analysis. It is identified by daily price movements, in particular the tops, which when graphed, form a downward sloping curve. Technical analysis of price information suggests that a rounding top may form at the end of an extended upward trend and that this price pattern may indicate a reversal in the long-term price movement.
The rounding top pattern can develop over several days, weeks, months, or even years, with longer time frames to completion forecasting longer changes in trend.
The duration of the pattern may take months or sometimes years to coalesce. Investors should be aware of the potentially lengthy timeframe necessary to realize a full downturn in price.
Understanding a Rounding Top
A rounding top pattern is similar to that of an inverse saucer pattern. It is also similar to and may occur coincidentally with, a double top or triple top price pattern. The main point of recognizing the rounding top pattern is to anticipate a significant change in trend from upward trending prices to downward trending prices. Recognizing this kind of a change can allow traders to take profits and protect themselves from buying into an unfavorable market, or strategize to make money from falling prices by short-selling.
The rounding top pattern has three main components:
A rounding shape where prices trend higher, taper off, and trend lower;
An inverted volume pattern (high on either end, lower in the middle of the pattern);
The support price level is found at the base of the pattern.
Generally, a rounding top will also represent a bearish future outlook for security. However, investors should be cautious when following a rounding top as support for the security’s price can occur causing several rounding tops to follow in a double top or triple top pattern.
What Is a Spinning Top Candlestick?
A spinning top is a candlestick pattern that has a short real body that's vertically centered between long upper and lower shadows. The candlestick pattern represents indecision about the future direction of the asset. It means that neither buyers nor sellers could gain the upper hand.
A candlestick pattern forms when the buyers push the price up during a given time period, and the sellers push the price down during the same time period, but ultimately the closing price ended up very close to the open. After a strong price advance or decline, spinning tops can signal a potential price reversal if the candle that follows confirms. A spinning top can have a close above or below the open, but the two prices are always close together.
What Is a Gravestone Doji?
A gravestone Doji is a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance at the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer-term bearish downtrend.
Now let's review the February example:
Reference Article:
https://www.investopedia.com/terms/r/roundingtop.asp
https://www.investopedia.com/terms/s/spinning-top.asp
https://www.investopedia.com/terms/g/gravestone-doji.asp
What Is a Rounding Top?
A rounding top is a price pattern used in technical analysis. It is identified by daily price movements, in particular the tops, which when graphed, form a downward sloping curve. Technical analysis of price information suggests that a rounding top may form at the end of an extended upward trend and that this price pattern may indicate a reversal in the long-term price movement.
The rounding top pattern can develop over several days, weeks, months, or even years, with longer time frames to completion forecasting longer changes in trend.
The duration of the pattern may take months or sometimes years to coalesce. Investors should be aware of the potentially lengthy timeframe necessary to realize a full downturn in price.
Understanding a Rounding Top
A rounding top pattern is similar to that of an inverse saucer pattern. It is also similar to and may occur coincidentally with, a double top or triple top price pattern. The main point of recognizing the rounding top pattern is to anticipate a significant change in trend from upward trending prices to downward trending prices. Recognizing this kind of a change can allow traders to take profits and protect themselves from buying into an unfavorable market, or strategize to make money from falling prices by short-selling.
The rounding top pattern has three main components:
A rounding shape where prices trend higher, taper off, and trend lower;
An inverted volume pattern (high on either end, lower in the middle of the pattern);
The support price level is found at the base of the pattern.
Generally, a rounding top will also represent a bearish future outlook for security. However, investors should be cautious when following a rounding top as support for the security’s price can occur causing several rounding tops to follow in a double top or triple top pattern.
What Is a Spinning Top Candlestick?
A spinning top is a candlestick pattern that has a short real body that's vertically centered between long upper and lower shadows. The candlestick pattern represents indecision about the future direction of the asset. It means that neither buyers nor sellers could gain the upper hand.
A candlestick pattern forms when the buyers push the price up during a given time period, and the sellers push the price down during the same time period, but ultimately the closing price ended up very close to the open. After a strong price advance or decline, spinning tops can signal a potential price reversal if the candle that follows confirms. A spinning top can have a close above or below the open, but the two prices are always close together.
What Is a Gravestone Doji?
A gravestone Doji is a bearish reversal candlestick pattern that is formed when the open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow suggests that the bullish advance at the beginning of the session was overcome by bears by the end of the session, which often comes just before a longer-term bearish downtrend.
Now let's review the February example:
Reference Article:
https://www.investopedia.com/terms/r/roundingtop.asp
https://www.investopedia.com/terms/s/spinning-top.asp
https://www.investopedia.com/terms/g/gravestone-doji.asp
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Understanding Outside Days
Outside days are a two-bar chart pattern that occurs when the current day’s price bar has a higher high and a lower low than the prior bar, and the open and close of the second day fall outside the open and/or close of the first day. Unlike bullish or bearish engulfing patterns, outside days look at an entire price bar, including both the high and low and the open and close.
An outside day shows that volatility is on the rise. The longer body (the difference between open and close) of the second bar shows greater conviction on the part of the buyers or sellers, and provides clues as to the future direction of the security. If the second price bar heads lower, it shows sellers were in control and the price may continue down. If the second price bar was up, it shows buyers were in control and the price may continue to rise.(Investopedia)
Outside days are a two-bar chart pattern that occurs when the current day’s price bar has a higher high and a lower low than the prior bar, and the open and close of the second day fall outside the open and/or close of the first day. Unlike bullish or bearish engulfing patterns, outside days look at an entire price bar, including both the high and low and the open and close.
An outside day shows that volatility is on the rise. The longer body (the difference between open and close) of the second bar shows greater conviction on the part of the buyers or sellers, and provides clues as to the future direction of the security. If the second price bar heads lower, it shows sellers were in control and the price may continue down. If the second price bar was up, it shows buyers were in control and the price may continue to rise.(Investopedia)
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