Is this a formation and a reversal?
Important Bull Market Results for Bump-and-Run Reversal Top
Overall performance rank (1 is best): 1 out of 53
Break even failure rate: 9%
Average decline: 19%
Pullback rate: 64%
Percentage meeting price target: Not measured
The above numbers are based on 1,489 perfect trades. See the glossary for definitions.
Arithmetic scale Use the arithmetic chart, not the semi logarithmic one because you will use it to measure vertical distances.
Rising trendline A trendline connecting the price valleys rises upward at 30 to 45 degrees, but this varies with scaling. Do not use horizontal or near-horizontal trendlines and avoid patterns with steep (over 60 degrees) trendlines.
Lead-in phase The lead-in is the section at the start of the pattern and it precedes the bump phase. Price follows a rising trendline. The figure to the lower right shows an example.
Lead-in height The tallest distance in the first quarter of the chart pattern, measured vertically, is the lead-in height. Must be at least $1, but preferably $2 or more. The chart on the right shows the measure between the two blue dots, vertically, from trendline to price low.
Lead-in duration At least a month, but be flexible.
Bump phase Price rises in the bump phase following a steeper trendline (45 to 60 degrees) on high volume usually after a favorable event (earnings report, rating upgrades). Price rounds over and eventually returns to the lower, 30-degree trendline setup in the lead-in phase. The chart on the right shows an example.
Bump height Measured from the peak to the 30-degree trendline, it should be at least twice the lead-in height (but be flexible). The chart on the right shows an example between the two blue dots.
Downhill run After price returns to the 30-degree trendline, price may bump up and form additional bumps or slide along the trendline before plunging lower in a downhill run. The figure to the right shows one bump up followed by the downhill run.
Volume High at the start of the pattern, at the bump start, and at the downward breakout (where price pierces the 30-degree trendline).
Confirmation The pattern confirms as a valid one when price closes below the 30-degree trendline. If price does not close below the trendline, then you do NOT have a valid pattern.
Trading Tactic Explanation Measure lines for a bump and run reversal appear.
The Measure Rule
Measure rule Compute the lead-in height then multiply it by 78% (the old stat for 'percentage meeting price target'). Subtract the result from the breakout price (B) to get a target.
Breakout Sell an existing holding or sell short when price closes below the 30-degree trendline AB at B.
Confirmation Wait for confirmation before placing a trade.
Warning line Draw a line parallel to the 30-degree trendline and lead-in height above it (the lowest line parallel to AB). The line warns that the stock is making a move and is entering the sell zone, an area between the warning and sell lines.
Sell line Draw additional trendlines parallel to the warning line, each lead-in height above it (E, shown as the green arrows). Consider selling when price touches the sell line, especially if the bump is narrow not rounded. Delay selling if price continues moving up. When the stock rounds over and touches a lower sell line (C), then close out your position. The figure to the right shows the sell lines and price piercing a lower sell line, suggesting it is time to take profit.
Pullbacks Pullbacks hurt performance. The link to the left defines a pullback, and this link shows performance.
Dual bumps 18% show additional bumps after the first one. The second bump would begin at B, rise up, round over and crash through the 30-degree trendline for a downward breakout.
Important Bull Market Results for Bump-and-Run Reversal Top
Overall performance rank (1 is best): 1 out of 53
Break even failure rate: 9%
Average decline: 19%
Pullback rate: 64%
Percentage meeting price target: Not measured
The above numbers are based on 1,489 perfect trades. See the glossary for definitions.
Arithmetic scale Use the arithmetic chart, not the semi logarithmic one because you will use it to measure vertical distances.
Rising trendline A trendline connecting the price valleys rises upward at 30 to 45 degrees, but this varies with scaling. Do not use horizontal or near-horizontal trendlines and avoid patterns with steep (over 60 degrees) trendlines.
Lead-in phase The lead-in is the section at the start of the pattern and it precedes the bump phase. Price follows a rising trendline. The figure to the lower right shows an example.
Lead-in height The tallest distance in the first quarter of the chart pattern, measured vertically, is the lead-in height. Must be at least $1, but preferably $2 or more. The chart on the right shows the measure between the two blue dots, vertically, from trendline to price low.
Lead-in duration At least a month, but be flexible.
Bump phase Price rises in the bump phase following a steeper trendline (45 to 60 degrees) on high volume usually after a favorable event (earnings report, rating upgrades). Price rounds over and eventually returns to the lower, 30-degree trendline setup in the lead-in phase. The chart on the right shows an example.
Bump height Measured from the peak to the 30-degree trendline, it should be at least twice the lead-in height (but be flexible). The chart on the right shows an example between the two blue dots.
Downhill run After price returns to the 30-degree trendline, price may bump up and form additional bumps or slide along the trendline before plunging lower in a downhill run. The figure to the right shows one bump up followed by the downhill run.
Volume High at the start of the pattern, at the bump start, and at the downward breakout (where price pierces the 30-degree trendline).
Confirmation The pattern confirms as a valid one when price closes below the 30-degree trendline. If price does not close below the trendline, then you do NOT have a valid pattern.
Trading Tactic Explanation Measure lines for a bump and run reversal appear.
The Measure Rule
Measure rule Compute the lead-in height then multiply it by 78% (the old stat for 'percentage meeting price target'). Subtract the result from the breakout price (B) to get a target.
Breakout Sell an existing holding or sell short when price closes below the 30-degree trendline AB at B.
Confirmation Wait for confirmation before placing a trade.
Warning line Draw a line parallel to the 30-degree trendline and lead-in height above it (the lowest line parallel to AB). The line warns that the stock is making a move and is entering the sell zone, an area between the warning and sell lines.
Sell line Draw additional trendlines parallel to the warning line, each lead-in height above it (E, shown as the green arrows). Consider selling when price touches the sell line, especially if the bump is narrow not rounded. Delay selling if price continues moving up. When the stock rounds over and touches a lower sell line (C), then close out your position. The figure to the right shows the sell lines and price piercing a lower sell line, suggesting it is time to take profit.
Pullbacks Pullbacks hurt performance. The link to the left defines a pullback, and this link shows performance.
Dual bumps 18% show additional bumps after the first one. The second bump would begin at B, rise up, round over and crash through the 30-degree trendline for a downward breakout.
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