A Bump and Run Top Pattern is a common reversal pattern, occurring after a stock makes a parabolic move on top of an extended uptrend. More and more buyers are attracted to the stock with few sellers willing to deal the stock, until the smart money begins to sell and supply catches up with demand. As the recent buyers of the stock at the top (known as "weak hands") begin to panic and sell, the trend reverses and picks up speed on the way down, plunging through the original Uptrend at the Breakdown point.
Success Rate: 81%, based on correctly identifying the parabolic uptrend with decreasing volume.
Duration: Bump and Run Tops take about 7 months to form, on average. before the parabolic uptrend moves into the rounded top, where selling begins.
Volume: High at the start of the Uptrend but quickly fades. Volume will increase as the selling starts at the top of the pattern.
Risks: Parabolic uptrends can be very powerful; as long as there is volume to drive the stock price higher, the Uptrend will sustain itself. Key on the lower volume during the last part of the Uptrend.
Trading the Pattern: Aggressive traders will identify and trade short from the top of the pattern, as selling intensity increase. Conservative traders will enter short after the price undercuts the original trendline at the Breakdown point.www.Ktcashflow.com