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Bump and Run Reversal Top

price bars rise with a trendline and then begin to rise much faster, peak and then fall down quickly

The bump and run reversal top begins with an uptrend approximately 30 to 45 degrees that lasts for at least a month period (this is called the "lead-in"); this is followed by an increase in steepness (approximately 45 to 60 degrees) called the "bump"; lastly, prices rollover and fall downward (the "run") to the 30 to 45 degree uptrend line established before the bump; once prices penetrate and close below the uptrend line, a sell signal is triggered (Bulkowski, 2005).

Bump and Run Reversal Top Average TimeSpans and Slope Angle

diagram describing the slope angle of the bump and run reversal top

Bump and Run Reversal Top Bump Height

diagram illustrating the height ratio of the bump discussed below

Do note that the height of the bump must be at least twice the height of the largest ranged price bar (the largest ranged price bar should be greater than $1 in height) in the first part of the 30 to 45 degree uptrend (Bulkowski, 2005).

Bump and Run Reversal Bottom

price bars fall with a trendline and then begin to fall much faster, bottom and then rise up quickly

The opposite is the bump and run reversal bottom that begins with a downtrend, then a steeper downtrend, then a bottoming out and reversal to the upside. When prices surpass and close above the downward trendline, a buy signal is triggered. The one caveat of the bump and run reversal bottom is that Bulkowski (2005) recommends the pattern not be traded near the 52 week high.

Price Targets

The suggested price target after a breakout signal is triggered is given next (Bulkowski, 2005):

Bump-and-Run Reversal Bottom with Breakout Above: Highest High of Pattern OR Breakout Price + ((Highest High of Formation - Lowest Low of Formation) * 68%)
Bump-and-Run Reversal Tops with Breakout Below: Breakout Price - ((Breakout Price) * 78%)

Note that the Lead-in Height is the highest high minus the lowest low in the lead-in portion of the pattern.

Bump and Run Reversal Top Chart Example

see description below for description of bump and run reversal top on the commodity chart of Silver

The chart above of the Silver ETF (SLV) illustrates a bump and run reversal top. The lead-in is an uptrend at a 36 degree angle. The trend then increases to roughly a 65 degree angle. Prices then create a mini double top by rolling over and then the same price bar that would signal a double top sell signal also triggers the sell signal of the bump and run reversal top which means the 36 degree angle was pierced and prices closed below it.

Bump and Run Reversal Bottom Chart Example

see description below for description of bump and run reversal bottom on the stock chart of Alcoa

The chart above of Alcoa (AA) illustrates a bump and run reversal bottom. The downtrend is a 25 degree angle followed by a gap down and the creation of the bump bottom. Prices then rally back upward and then pierce and close above the prior 25 degree downtrend, triggering the buy signal.

Works Referenced

  1. Nison, S. (2003) The Candlestick Course. Hoboken: John Wiley & Sons.
  2. Nison, S. (1994) Beyond Candlesticks: New Japanese Charting Techniques Revealed. New York: John Wiley & Sons.
  3. Nison, S. (1991) Japanese Candlestick Charting Techniques. New York: New York Institute of Finance.
  4. Rhoads, R. (2008) Candlestick Charting For Dummies. Hoboken: Wiley Publishing.
  5. ThinkorSwim. (2011). ThinkorSwim Resource Center: Candlestick Patterns Library.
  6. The Pattern Site. (2005). Bulkowski’s Bump-and-Run Reversal Bottoms . Retrieved June 1, 2012, from http://www.thepatternsite.com/barrb.html
  7. The Pattern Site. (2005). Bulkowski’s Bump-and-Run Reversal Tops . Retrieved June 1, 2012, from http://www.thepatternsite.com/barrt.html