The bump and reversal pattern in online trading is an advanced form of chart patterns to help online traders spot when a new trend is going to start and end of the current trend. You can always get information about trends on various online platforms such as Global CTB to stay up to date.
This pattern is also known as BARR or “Bump and Run Reversal” pattern. It is a reversal pattern that appears when any online stock experiences a fast and massive hike in its price. This happens due to excessive speculation in online marketing regarding this particular stock or venture.
BARR was first introduced by Mr. Thomas Bulkowski back in 1996 while he was conducting research on price prediction tactics using various trend lines.
Phases of BARR
There are three phases of BARR that are
- Lead-in Trendline – this phase represents the uptrend as the prices rise normally.
- The Bump – this phase shows the stock price when it starts to rise rapidly
- The Run – this is the phase where the stock price comes back to the original trend line.
Why Bump and Reversal Pattern form, and it’s meaning?
As we mentioned earlier, BARR forms when excessive speculation in the market drives the spike in prices. When this pattern forms, it also depicts the reversal of the current trend and whether it be long term or short term.
Once the stock prices peak, they start to come down back to the original price trend line, and the chart begins to show the accurate bump.
How to trade Using the BARR?
When you trade using BARR, you need to prioritize the task of identifying the uptrend and its acceleration.
Here is a checklist to help you with the bump and reversal pattern.
- Identifying a stock that is trending. The pattern must be inclined somewhere between 30 degrees and 45 degrees on the trade chart.
- The bump on your chart must be steeper and depict the 45 to 60-degree inclination on the price chart. Bulkowski recommended adding the formation height at the lead-in segment.
- Volume is vital for BARR’s to be valid. Volume is generally lower in the preceding trend. It then spikes high after the bump phase appears on the price chart. This enables the lifting of stock and creating an actual bump on the stock chart.
- Always confirm and validate your BARR by checking the vertical distance between the leading trend and bump’s top. It should be at least twice in size to that of the vertical distance between the leading trend line and price action prior to the formation of the bump.
- The actual BARR confirmation comes when it breaks away from the current leading trend line. Once a bump is formed, the price of the stock will be expected to initiate moving towards the trend line.
Although, prices in online trading action might hesitate momentarily when reaching the trend, but if the pattern is valid, you will see a breakout appearing through the trend. If it happens, you can consider the pattern to be valid and move forward to pursue and explore its potential.
Conclusion
The BARR pattern is a remarkable way to help you as an online trader to spot when the trend is going to end and start of a new trend. To learn more about it, you can always get help from expert sources such as Global CTB.
You should know this is a powerful pattern for you to take advantage of excessive market speculations. Online traders tend to utilize BARR to capitalize on fast-moving opportunities.
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