WEBVTT 00:03.060 --> 00:10.620 In this video we'll talk about how to trade rounding tops and rounding bottoms so a rounding top as 00:10.650 --> 00:15.570 I'm sure you can imagine is at the top of a move higher. 00:15.690 --> 00:24.450 Now rounding bottom is at the bottom of a move lower takes a little bit of artistic license to identify 00:24.450 --> 00:33.660 these patterns but as a general rule and basically when in the case of a rounded rounding top when the 00:33.660 --> 00:40.950 market does this no rounding bottom like this at the bottom of a downtrend at the top of an uptrend. 00:41.610 --> 00:43.260 So think about what this means. 00:43.260 --> 00:46.820 This means that the market has taken its time. 00:47.190 --> 00:51.940 In the case of a rounding top we've rallied for a while. 00:52.570 --> 00:58.360 We've run into some resistance but it's not it's more like a lack of momentum. 00:59.880 --> 01:07.980 Perhaps the overall attitude of the market starting to change maybe some fundamentals have changed or 01:07.980 --> 01:15.400 there's just a simple lack of enthusiasm for a stock and that forms over time. 01:15.430 --> 01:22.890 This rounded top one just kind of lose interest thing with a rounding bottom been selling off selling 01:22.890 --> 01:28.260 off and then just gradually the selling pressure abates and we reach towards the upside. 01:28.320 --> 01:32.370 So when trading these things you take the height of the pattern 01:35.440 --> 01:42.960 you draw an imaginary line down here and then on a break of what would be the next line for lack of 01:42.960 --> 01:49.440 a better term or you know the bottom of the pattern or top of the pattern if it's rounding bottom you 01:49.440 --> 01:56.350 take the measurement of the height of the actual pattern itself and extrapolate the breakout. 01:56.530 --> 01:59.110 So for example this was two dollars tall. 01:59.230 --> 02:04.600 Once we break through this level you're aiming for another two dollars your stop loss goes about halfway 02:04.600 --> 02:10.270 into the pattern quite frankly because if you get a breakdown in the break back up into it then it's 02:10.270 --> 02:18.520 not really sticking and it's just more kind of back and forth so a rounding top can be identified. 02:20.140 --> 02:25.570 As such you can see that clearly the market has just tried to rally and this just couldn't hang on to 02:25.570 --> 02:25.710 it. 02:26.780 --> 02:28.270 And there's your pattern. 02:28.470 --> 02:32.730 The height is from twenty seven to twenty nine fifty 02:35.380 --> 02:40.610 so that would be two dollars and fifty cents from the breakdown from twenty seven. 02:40.810 --> 02:48.090 So you're looking for 20 for 50 and that is exactly where you end up. 02:48.090 --> 02:53.430 You do get a little bit of a pullback and you do get another chance to enter based upon this previous 02:53.430 --> 02:54.750 support. 02:54.750 --> 02:59.320 So sometimes you get that opportunity as well if you miss it. 03:01.280 --> 03:07.790 Rounding bottom you can see that Yum Brands took its time just kind of pulled back and then just kind 03:07.790 --> 03:18.690 of went like this for several months from about sixty two to sixty six gives you a target of 70 which 03:18.690 --> 03:22.370 we do hit rather quickly. 03:22.400 --> 03:29.060 The nice thing about these patterns is they take a long time to set up so you keep your eye on him for 03:29.060 --> 03:30.200 quite some time. 03:30.210 --> 03:38.610 Also something else that I would point out is the longer the time that it takes to form the pattern 03:38.760 --> 03:46.130 the more impressive it will be because it takes a lot more order flow to make these moves in this case 03:46.130 --> 03:46.610 here. 03:46.610 --> 03:53.480 This would have been about two and a half months over here and the one in Microsoft about the same maybe 03:53.480 --> 03:54.230 three months.