Knitting color stripes in the round can result in jogs at the "seam" line where each new round begins. In Meg Swansen's Knitting (Interweave, 1999), Meg offers an ingenious technique for eliminating these jogs when working solid-color stripes of two or more rounds.
Work the first stripe (let's call that color A) for the desired number of rounds, change colors (color B) and knit one round.
Work the first stitch of the second round with color B as follows: Pick up the right side of the stitch in the row below the stitch on the needle (it will be color A), put it on the left needle and knit it together with the first stitch on the needle. You will have worked the first stitch of the round twice, but because you work into the stitch below the one on the needle the second time, you have only worked it for one round and it appears as if it were worked just once.
The jog between the two colors disappears and the beginning of the round for color changes only is shifted one stitch to the left. Note: Do not change the position of markers required for the placement of any shaping decreases or increases (such as ones used for waist shaping).
Continue working as many rounds as you want with color B.
To change to another color, simple repeat the process, working the first stitch of the round a second time by picking up the stitch in the row below the stitch on the needle and knitting it together with the first stitch on the needle, thereby shifting the beginning of the round one more stitch to the left for color changes.