V.15:6 (247-254): The Bump-And-Run Reversal by Thomas Bulkowski

The Bump-And-Run Reversal by Thomas Bulkowski

Here's a new chart pattern that suggests when to take profits before a trend change begins. Included is a review of past performance.

Isn’t it strange how an idea occurs? Being hit by a falling apple led Sir Isaac Newton to extrapolate that the apple was acted upon by the same force as that which allows the moon to orbit the Earth. Similarly, while I was doing research on price prediction, a thought came to me when I came across an illustration showing the measure of a head-and-shoulders formation. I wondered if there were a simple measuring technique to determine how far prices would fall once a trendline had been penetrated. In my quest to answer the question, I discovered a trendline formation that I call the bump-and-run reversal (BARR).

Before you can identify a bump-and-run reversal, you need to draw an upsloping trendline correctly. Rising trendlines connect the lows of a price series and represent an area of support. Suffice it to say that you locate the lowest low on the chart for the period being considered. From that point, draw a line to the highest minor low before the highest high without crossing any prices in between. The method is simple, repeatable and accurate.