Jennifer Lopez

The financial world has adopted the famous pop star’s name to describe one of the anomalies in share pricing. Also known as a rounding bottom, a Jennifer Lopez is an informal term given to the movement of pricing of a security. The price of a share reaches bottom and gradually starts to increase, hence, the name rounding bottom. This means that the price of the security is moving from low to high and the increase is likely to be sustained. It is believed that this is a positive sign. If one creates a chart of the pricing of a rounding bottom security then it would be U shaped. The prices tend to go upwards when the buyers enter the trade in the market at a low price which increases the demand of the share. Once the rounding bottom is complete, the share is likely to sustain its upwards trend. The market in such a condition changes from bearish to bullish.

Volume (the amount of security traded at a given point of time) plays an important role while ascertaining a rounding bottom pattern. The volume forms a U-shaped pattern, meaning that it is high in the beginning, then becomes to fall and becomes flat in the middle and then later again the volume begins to rise. The expectation at the last stage is that the price would continue to go higher. Once the price has hit the target of expectation, a trader looks to exist the trade or their position.

A chart example for a rounding bottom is given below: