Bump and Run Pattern
Learn to recognize and trade a bump and run pattern through interactive charts.
What is a bump and run pattern?
A Bump and Run pattern is a bearish reversal pattern that happens after prices rise too far, too fast.
- GameStop (GME) Bump and Run stocks
- Xpeng (XPEV) Bump and Run stocks
- Moderna (MRNA) Bump and Run stocks
- Macy’s (M) Bump and Run stocks
Bump and run duration
A bump and run pattern usually unfolds over several months.
Bump and run characteristics
This pattern consists of three phases: the Lead-in, the Bump and the Run.
- Lead-in: this initial phase starts with a moderate uptrend, sloping upwards generally by 30 to 45 degrees. It should be neither too flat, nor too steep, and last at least one month.
- Bump: this phase marks an acceleration in the uptrend. The slope of the trendline should be approximately 50% greater than during the Lead-in, between 45 and 65 degrees in this case. This phase, driven by speculative excess, ends in a 'blow-off top'.
- Run: this phase begins when the price falls below the trendline formed by extending the Lead-in. Once the Lead-in trendline acts as resistance rather than support, the price is likely to fall lower.
Trading volumes generally accelerate during the Bump, pushing prices up into a blow-off top. Volumes may also spike as the price touches and ultimately breaks below the Lead-in trendline.
Bump and run trading tips
Wait for the price to break convincingly below the Lead-in trendline before opening a short position. This break should ideally happen on higher than average volumes. Some traders wait for an unsuccessful retest of the trendline before opening a short position. This means waiting for confirmation that the trendline acts as resistance, rather than support over several trading sessions.
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