The bump and run pattern starts with a standard . Suddenly, a relatively big impulse appears on the chart – the bump. After new lows are reached, the price action reverses, reaches the and breaks it upwards to start a fresh move – the run.
5 Tips to Confirm a Bump and Run Chart Pattern
The structure of the bump and run pattern is very specific. Therefore, you should carefully examine the chart pattern before placing a trade.
1) Angle of the General Trend
First, you need to identify a trending stock. The inclination of the pattern should be anywhere between 30 and 45 degrees on the chart.
2) Angle of the Bump
The bump on the chart should definitely be steeper. After all, it is a trend impulse, right? The valid bump would have an inclination anywhere between 45 and 60 degrees on the chart.
3) Trading Volumes
Volumes are crucial for the validity of the bump and run formation. During the preceding trend, the volumes are usually low. Then the bump appears on the chart and volumes will tend to spike higher.
This helps the stock accelerate higher, creating the actual bump on the chart.
4) Bump and Run Pattern Sizes
Another crucial aspect of the bump and run structure is the size of the bump compared to the previous impulses.