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Rounding & Wedges

Updated Jun 23, 2026 at 8:47pm

Research Draft Medium 1,131 words

Two unrelated chart-pattern families that share only a curved or converging silhouette. Rounding patterns (also "saucers") are slow, gradual reversals — a U-shaped rounding bottom marks a quiet shift from distribution to accumulation, an inverted-U rounding top the reverse — and the gradualness is the point: there is no single dramatic pivot, just a sentiment regime changing over weeks or months. Wedges are formed by two converging trendlines that slope the same direction: a rising wedge tilts up, a falling wedge tilts down. Wedge directional lore is widely taught — rising = bearish, falling = bullish — but the central honest tension here is that wedge classification is subjective (whether a drawing is a "wedge" vs a triangle vs a channel is often in the eye of the analyst), the reversal-vs-continuation reading depends entirely on the prior trend, and Bulkowski's measured base rates rank both wedges poorly to middling while ranking the rounding patterns among the better performers — the opposite of their relative reputations.

How they're formed

Rounding bottom (saucer). A long, smooth U: price declines, flattens at a low over an extended base, then gradually advances. Best seen on the weekly scale; it can take months. Per StockCharts ChartSchool, ideal volume tracks the bowl — high into the early decline, lowest at the basin, then rising on the advance, with the breakout above the left-side reaction high (the "rim") confirming on expanding volume. A rounding top is the mirror inverse-U and is read as bearish.

Rising wedge. Two up-sloping converging lines. StockCharts specifies at least two reaction highs and at least two reaction lows, with the lower support line steeper than the upper resistance line so they converge upward; volume should contract as price grinds higher. The operative signal is a break of the lower line. Bulkowski wants at least three touches among the trendlines for a valid pattern.

Falling wedge. Two down-sloping converging lines, the upper line steeper so they converge downward; volume contracts into the apex. The operative signal is a break of the upper line.

The reversal/continuation label is purely contextual: a rising wedge after an uptrend is a bearish reversal; the same shape inside a downtrend is a bearish continuation. StockCharts' summary: "regardless of the type (reversal or continuation), rising wedges are bearish" — and symmetrically, falling wedges are read as bullish either way.

How they're used in practice

Standard practice across all four is to trade the confirmed breakout, not the pattern's anticipation: wait for a close beyond the operative trendline, ideally on a volume expansion, because pre-breakout entries are exposed to the high failure rates below.

Measured-move targets, where one exists:

  • Rounding bottom — height = left-rim-to-low distance, added to the right-rim breakout price (Bulkowski refines this by multiplying height by the percentage-meeting-target before adding).
  • Rounding top — height = peak-to-right-rim-low, projected from the breakout.
  • Falling wedge — Bulkowski uses the pattern's highest peak as the upward target (or height × hit-rate from the breakout).
  • Rising wedge — Bulkowski uses the lowest valley as the downward target. Notably, StockCharts states there are "no measuring techniques to estimate the decline" for a rising wedge, so the projection is weak and many traders fall back to prior support levels instead.

The swing-specific operational mechanics — exact entry trigger relative to the trendline, stop placement, partial-target scaling, hold horizon — live in the Swing Trading branch; this node defers those.

Standing & evidence

This is the section where reputation and measured data diverge, so attribution matters. All figures below are Thomas Bulkowski (thepatternsite.com / Encyclopedia of Chart Patterns), bull-market, ranked 1 = best out of his pattern set.

Rounding bottom — Bulkowski ranks it 7 of 39, break-even failure rate 4%, average rise 48%, throwback 64%, % meeting price target 65%, based on 990 perfect trades. He notes the curiosity that it often behaves as a continuation (price already trending up into the pattern), not the textbook bullish reversal.

Rounding top — ranks 2 of 39 (up breakouts) / 3 of 36 (down), break-even failure 9% / 20%, average move +55% / −17%, % meeting target 58% / 14%, from >950 perfect trades. Despite the "bearish reversal" billing, Bulkowski's data shows it frequently breaks upward. (Bulkowski uses "rounding/rounded top"; some treat the bearish saucer-top separately — naming is not standardized across sources.)

Rising wedge — among the worst patterns he tracks: 32 of 39 up / last, 36 of 36 down. Break-even failure 19% (up) / 51% (down), average move +38% / −9%, throwback/pullback 72%, % meeting target 63% / 32%. Downward breakouts occur ~60% of the time; volume trends down ~79% until breakout. From >1,400 perfect trades. The downward break — the "bearish" textbook play — has a 51% break-even failure rate, i.e. roughly a coin flip.

Falling wedge — middling: 31 of 39 up / 27 of 36 down, break-even failure 26% / 29%, average move +38% / −14%, throwback/pullback 62% / 74%, % meeting target 62% / 29%, upward breakout ~68%, from >800 perfect trades.

The honest synthesis: wedges' directional folklore is not supported by strong measured edge — the rising wedge in particular ranks at or near the bottom of Bulkowski's set, and its "bearish" downside break fails ~half the time. The rounding patterns, less glamorous, actually rank far better in the same dataset.

Strengths & limitations

Rounding patterns work best on weekly charts over months; their strength is the very low break-even failure rate and large average move. Their weakness is identification lag — by the time the U is unmistakable, much of the move may be spent, and a "rounding" base only becomes a pattern in hindsight.

Wedges' stated strength is an early read on momentum exhaustion (rising price on falling volume). Their core limitation, and the single most common misuse, is classification subjectivity: a converging drawing can be labeled a wedge, a triangle, or a channel depending on where the analyst anchors the lines, and the rising-wedge "always bearish" rule tempts traders into shorting strength with no measured target and a ~50% downside-failure rate. Treat wedge calls as low-confidence pattern recognition requiring breakout confirmation, never as standalone directional signals. All four are reliability-degraded by small samples, low-liquidity names, and choppy regimes where converging lines form by noise alone.

System relevance

Within Delvantic, this node is a TA-definition sibling to the other chart-patterns nodes; the swing-execution mechanics belong to the Swing Trading branch and are deferred there. The hard caveat for the Augustus trade-setup agent: a "wedge" tag is a weak, subjective input — it should be cross-checked against volume context and Cairn's measured track record rather than treated as a directional call, whereas a clean weekly rounding base carries materially better base rates in Bulkowski's data despite its quieter reputation.

Sources