Rounding Top
A rounding top is a long-term reversal pattern where price gradually transitions from uptrend to downtrend, forming an inverted U-shape. It's the bearish counterpart to a rounding bottom.
Understanding the Concept
This pattern shows slow distribution. Smart money is selling into strength while retail keeps buying. The gradual curve indicates sentiment shifting from bullish to bearish over time. Volume often increases on the left side (buying) and decreases on the right (weakening demand). The breakdown below the pattern's starting support confirms the reversal. Rounding tops are tricky because they form slowly—by the time you recognize it, much of the damage is done. Watch for early signs like decreasing volume on rallies.
Real-World Example
Netflix rallies from $400 to $700, then price slowly curves over four months and breaks back below $400. The rounding top suggests distribution is complete—lower prices ahead.
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