Naturalgas positional analysis 14/09/2013
Naturalgas~ positional analysis
Buy Naturalgas above 235.00
Targets : 247.00 - 253.00
Stoploss : 229.00
Note :- This is my personal view only,take positions with your own analysis...
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Rounding Bottom
The rounding bottom is a U-shaped bottom, also called "saucer. " The dip is very rounded with a flat bottom. However, we see in many cases several bearish peaks but they do not put in question the validity of the pattern.
The neckline of the pattern is formed by the highest point prior to the formation of the U.
Here is a graphical representation of a rounding bottom:
Rounding Bottom
There is no theoretical target price. Some authors measure the depth of the U and report it on the neckline like on a double bottom for example. However, it is not advisable to apply this method, indeed the target is then reach in only 36% of cases. The theoretical objective that is recommended is to measure the depth of the U and then divide by 2, to postpone this height on the neckline.
The rounding bottom has been lengthily considered as a reversal pattern. However, the work of T. Bulkowski showed that in many cases the rounding bottom is a continuation pattern. However, when the neckline is broken, the results are very good.
Statistiques
Here are some statistics about the rounding bottom:
- In 62% of cases, there is a bullish reversal
- In 86% of cases, the exit is upward
- In 57% of cases, the target advised for this pattern is reached
- In 40% of cases, a pullback occur on the neckline
- In 95% of cases, there is a pursuit of the bullish movement after the breakout of the neckline
Notes
- The price often makes a break when the price gets back on the neckline
- More the dip is flat, more the movement at the breakout of the neckline will be strong
- If there is a pullback on the neckline after the breakout, the upward movement will be then less powerful
- If a significant upward spike occur after the formation of the bottom, it is possible to draw a downward line to connect the high point prior to the formation of the rounding bottom and the highest of the bullish peak.
Rounding Bottom
Trading Strategies
The classic strategy :
Entry: Take a long position at the breakout of the neckline
Stop: The stop is placed below the neckline
Target: Theoretical target of the pattern
Advantage: A lot of lows are made during the upward movement leading to the neckline so it's easy to set your stop
Disadvantage: Due to an accumulation zone shaping below the neckline, the breakout can be violent and so a large part of the movement could be lost.
The agressive strategy :
Entry: Take a long position at the breakout the bearish slant (example above)
Stop: The stop is placed below the last lowest
Target: Return on the neckline
Advantage: The ratio profit/risk is high because the stop is close
Disadvantage: The pattern is not yet confirmed and so the percentage of a losing trade is higher