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Rounded formations
Rounded formation is another reversal pattern derived from heads and shoulders. It can be described as head and shoulders pattern with no shoulders.
The rules that apply to the previously described patterns are applied to this pattern too. Trend reversal occurs in case of 3% penetration. The process must be confirmed by volume. Level to which prices will change after reversal can be obtained by projecting vertical line which connects top with neck line to the point of penetration.
Rounded formations may occur in two forms: reversal of upward trend (rounded top) and reversal downward trend (rounded bottom).
Rounded top