Bump-and-Run Reversal Tops and forex trading
Rising trend lines. In the figure, a trend line drawn below the lows in the
forex pair extends until it intersects prices as they decline in May.
Volume is high at the start of the pattern and the trend is up. That is a key consideration:
Prices must be rising. The trend line should be approximately 30 degrees, but
the degree of slope depends on the scaling used to view the chart. If the trend
line is flat or nearly so, it is not a good BARR candidate. A rising trend line shows
investor enthusiasm for the stock. However, the trend line should not be too
steep either. Steep trend lines (over 60 degrees or so) do not allow enough
room for the bump to complete properly.
Lead-in, lead-in height. The first part of the formation, called the leadin phase, leads to the bump phase.
Rounded bump
Prices rise up (trend line slope is 45–60 degrees or more) on
high volume usually after a favorable event (unexpectedly good
earnings, an analyst recommends or upgrades the forex pair , higher
store sales, that sort of thing). Prices eventually round over and
decline back to the 30 degree trend line. The bump must be at
least twice the lead-in height, measured from highest high to
the trend line, vertically.
Downhill run. Sometimes prices slide up along the trend line for a
month or so before continuing down. At other times, prices drop straight
through the trend line, turn around and climb again, before ultimately dropping.
In a few rare cases, prices descend from the bump high and never make
it back to the trend line before moving higher. These cases commonly appear
on weekly or monthly price charts.
measure rule is a method used to predict the minimum price decline of the forex trading .
To compute the predicted minimum decline, calculate the lead-in height
by splitting the formation along the trend line into four equal parts. In the first
quarter of the formation, compute the height from the highest high to the
trend line, measured vertically (or use the widest distance between the two).
Subtract the result from where the trend line is pierced, heading down (the
breakout)
Warning line
Drawn parallel to the trend line and lead-in height above it. The
line warns that the forex trading is making a move and is entering the
sell zone, an area between the warning and sell lines.
Sell line
A second trend line parallel to the warning line and lead-in
height above it. Consider selling trading signals when prices touch the sell line,
especially if the bump is narrow. Delay selling if prices continue
moving up. Draw additional lines parallel to the original trend
line and lead-in height above the prior line. When the forex pair
rounds over and touches the lower trend line, sell it.
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