Bump And Run Reversal Top Pattern
- This pattern is observed during a bullish rally.
- It generally leads to a trend reversal and a bearish rally is seen thereafter.
This is the 4hr chart of Infosys (NSE) around May 2017
AB = lead-in phase, BC = bump phase
- The pattern starts with a bullish trend for at least one month (lead-in phase) and the trend line at an inclination of 30o
- Then there is a sudden rise in the price level (bump phase) due to some positive news in the market (annual reports, better rating) and the trend line inclines around 45o-60o
- Soon, the price falls back to the lower trend line, stays there for a while (run phase) and later it breaks down the lower trend line, indicating a trend reversal.
- The trend reversal leads to a huge bearish rally and sellers exhibit their aggressiveness.
- There is a huge volume at the start of the pattern, at the start of the bump and at the breakdown of the trend line.
- Traders can go short in the trade as soon as the price pierces and breaks out of the trend line, as there is a huge bearish rally ahead.
- Few traders who want to earn quick profits, can enter the trade at the start of the bump and exit when the bump reaches its high. They can earn much more when there is a dual bump in the pattern, though the probability is less.