Rounded Tops and Bottoms

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Trading Rounded Tops and Bottoms - Part Two

I received some great input from you regarding last week’s round top/bottom formation assignment. Let’s continue the same lesson this week as we look at the wheat market.

If wheat is to complete a rounded top formation where would the neckline of the formation be?

 

Answer

Last week we looked at another possible rounded top/bottom formation, this time in the wheat market. Remember a rounded top/bottom has the neckline where the formation began. While there are intermediate support and resistance areas you can trade from before the neckline, the “true” neckline is always at the beginning of the formation.

homework chart

Unfortunately the wheat market made a serious rally last week so it looks as though our neckline target may not be reached. However if the market does continue lower again, look to the neckline as a probably longer term objective.

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