Technical analysis II

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14. Rounding tops and bottoms

A Rounding Top forms an "n" shape on a chart, and a Rounded Bottom a "u" shape.

A rounded bottom

It can be difficult to separate a Rounded Bottom from a consolidation pattern (i.e. one where the price continues to decrease or stay level), but the clue, as always, is in volume.

In a true Rounded Bottom, the volume decreases as the price decreases, which signifies an easing of selling pressure. As the price movement becomes neutral and goes sideways you will see that there is very little trading activity and volumes are very low. Then, as prices start to increase, the volume increases.

1. Average share prices 2. Moving averages 3. Weighted moving averages 4. Where to plot moving averages 5. Interpreting moving averages - the basics 6. Classic interpretation of moving averages 7. Combining short and long term moving averages 8. Moving average convergence/divergence (MACD) 9. Reversal patterns 10. Head and shoulders top 11. Head and shoulders bottom 12. Double top 13. Double bottom 14. Rounding tops and bottoms 15. Broadening formations 16. Wedge formations 17. The momentum indicator 18. The momentum oscillator 19. Rate of change indicator 20. Price minus average 21. Relative strength indicator 22. Conclusion

• Martin Pring's Introduction to Technical Analysis
• Technical Analysis Plain and Simple
• Technical Analysis of the Financial Markets
• An Introduction to Technical Analysis - Reuters Financial Training Series