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A gradual arc at the top. Unlike sharp reversals, this dome-shaped pattern shows slow, steady distribution.
The Rounding Top (also called an inverted saucer) is a gradual reversal pattern that forms as an uptrend slowly curves over and transitions into a downtrend. Unlike sharp reversal patterns, the rounding top unfolds over weeks or months, creating a smooth dome shape.
The pattern reflects a slow shift in sentiment โ buying pressure gradually weakens while selling pressure gradually increases. There's no dramatic moment of reversal; instead, the transition from bullish to bearish happens in a gentle arc. Think of a ball thrown in the air โ it doesn't stop instantly at the top, it smoothly curves over.
The Rounding Top shows the gradual exhaustion of a trend. During the left side of the dome, the uptrend is still intact but slowing. Each new high makes less progress than the last. Volume often begins declining as participation wanes.
At the top of the dome, price moves sideways. The advance has stalled but hasn't reversed โ buyers and sellers are in temporary balance. This is where institutional distribution often occurs as smart money quietly sells into whatever remaining demand exists.
The right side of the dome shows the acceleration of decline. What started as a slowdown becomes a downturn. Volume may increase as selling pressure mounts. The breakdown below the pattern's neckline (the support level where the dome began) confirms the reversal.
Conservative: Enter short on a break below the neckline with increased volume.
Aggressive: Enter short when price shows weakness in the right side of the arc.
Above the highest point of the rounding top. This is a gradual pattern - if price makes a new high above the dome, the bearish thesis is invalidated.
Measured Move: Height of the pattern (from support to the dome peak) projected downward from the breakdown. T1: 50% of measured move. T2: Full projection. Rounding tops unfold slowly, so be patient.
Minimum 1:2. The wide, gradual structure means stops can be large - adjust position size accordingly.
Rounding Tops are among the most reliable reversal patterns because they represent a genuine, gradual shift in supply and demand โ not a panic event. Edwards & Magee emphasized their significance, particularly on higher timeframes.
These take time to develop - often weeks or months. The gradual nature makes them easy to miss until it's too late.
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