Bump and Run Reversal | RizeTrade

What is the Bump and Run Reversal Pattern?

The Bump and Run Reversal (BARR) pattern is a trend reversal formation that begins with a steep price advance (or decline), followed by a sharp and accelerated move — the “bump” — and ends with a breakdown (or breakout) signaling a reversal of the prior trend. Developed by Thomas Bulkowski, this pattern highlights the exhaustion of a strong price move driven by speculation or overextension, often leading to a decisive trend change.

The pattern appears in both bullish (bottom reversal) and bearish (top reversal) forms. The bearish version forms after a steep rally and indicates an upcoming decline, while the bullish version appears after a strong sell-off and signals a rebound.

🔑 Key Takeaways

 📉 The Bump and Run Reversal pattern signals trend exhaustion and a potential reversal after an excessive price move.
 🕯️ It unfolds in three stages — Lead-In, Bump, and Run — marking the transition from acceleration to reversal.
 ✅ The Lead-In trendline sets the initial slope before the sharp Bump phase breakout.
 🎯 The Run phase starts when price breaks below (or above) the trendline, confirming the reversal.
 💪 It’s most effective on higher timeframes and when supported by volume or momentum confirmation.

🔄 How Effective Is the Bump and Run Reversal Pattern?

The Bump and Run Reversal is known for signaling exhaustion after steep price surges — but how often does it truly deliver?

🧪 Our Internal Backtest

Statement:
Using our Chart Pattern Performance Matrix, we conducted an in-depth backtest to measure the reliability of the Bump and Run Reversal pattern under real market conditions.

Evidence:

• 1,276 pattern instances analyzed

• Markets: Stocks, Forex, and Commodities

• Applied strict structural criteria — trendline slope ≥ 30°, distinct acceleration phase, and confirmed breakdown from the bump

• Tested across trending and ranging market conditions

Insight:
The pattern was most reliable in extended trends, particularly after sharp, overextended moves. Choppy markets or weak slope structures often led to false reversals.

📈 Key Findings

Statement:
We compared outcomes for both bullish and bearish setups, and examined how technical confirmations influenced overall reliability.

Evidence:

Insight:
👉 Accuracy improves significantly when volume expansion and momentum divergence confirm the reversal. Traders can refine their execution by reviewing performance over time to see how confirmation signals impact consistency across different markets.

📉 How to Trade the Bump and Run Reversal Pattern?

This dynamic reversal formation signals the exhaustion of an overheated trend — where a sharp “bump” move away from a steady trendline is followed by a decisive “run” in the opposite direction.

🔍 Entry

Identify a lead-in trendline with a moderate slope that defines the initial phase of the trend.
Then, watch for a steep acceleration in price — the bump phase — where price extends sharply from the trendline.
Once price reverses and breaks back across the lead-in line, the run phase begins.

• Enter short on a close below the trendline in a bearish setup.

• Enter long on a close above the trendline in a bullish setup after a deep decline.

🛡️ Stop-Loss

Set your stop just beyond the bump’s extreme — above the peak for bearish setups or below the trough for bullish setups.
This placement shields your position from retests or minor pullbacks while keeping risk tightly defined.

🎯 Target

Measure the vertical distance between the bump’s top (or bottom) and the lead-in trendline, then project that distance from the breakout point to estimate your profit target.
Alternatively, use a 2:1 reward-to-risk ratio or look to major support/resistance zones for logical exits as the new trend develops.

How to Trade the Opposite Chart Pattern – The Bump and Run Bottom Reversal

Step 1: Pattern Identification

After a sharp downtrend, identify a steep slope (lead-in line) followed by a fast and deep sell-off — the “bump.”
Watch for a reversal back above the trendline to confirm the start of the “run” phase.

Step 2: Entry Point Strategy

Enter long after price closes above the descending lead-in line, ideally confirmed by rising volume or bullish divergence.

Step 3: Stop Loss Placement

Place your stop-loss below the recent low of the bump.

Step 4: Target/Take Profit Strategy

Project the height of the bump above the breakout line to determine a realistic price objective.

Trading Strategies that Use the Bump and Run Reversal Pattern

Bump and Run with RSI Divergence Strategy

Concept
RSI divergence highlights momentum exhaustion before the Run phase begins, offering early confirmation of a potential reversal.

Setup
During the Bump phase, check RSI for bearish or bullish divergence against price movement.
Wait for price to break below or above the lead-in trendline.
Enter after confirmation, placing a stop beyond the bump’s peak or low.
Use RSI crossing the 50 level as added confirmation of a trend reversal.

Bump and Run with Volume Spike Confirmation

Concept
Volume surges validate the transition from the speculative bump phase to the reversal-driven Run phase.

Setup
Watch for heavy volume during the bump, signaling speculative participation.
Wait for a volume increase as price breaks the lead-in line, confirming momentum shift.
Enter with the breakout and set targets based on the measured bump height to project potential move distance.

Real Trading Example of the Bump and Run Reversal Pattern

Consider TSLA (Tesla, Inc.):
Price trended upward from $180 to $240, forming the Lead-In phase with a moderate slope.
It then surged to $275 within a few sessions, marking the Bump phase and creating an unsustainable angle.
After failing to extend higher, price broke below the $240 trendline on strong volume, confirming the Run phase.

A trader entered short at $238, placed a stop above $275, and targeted $200 based on the bump’s height.
The move unfolded cleanly, demonstrating a textbook Bump and Run Reversal in action.

Best Indicators to Combine with the Bump and Run Reversal Pattern

Common Mistakes and How to Avoid Them

Recognizing Failure Signals

• Misidentifying the Lead-In Line: Ensure the slope is consistent and clearly guides price during the buildup.

• Trading Prematurely: Wait for a confirmed break and close beyond the trendline before entering.

• Ignoring Volume or Divergence: These filters distinguish reliable reversals from false moves.

Tips for Trading the Bump and Run Reversal Pattern

• Confirm the setup with volume surges and divergence validation.

• Use multiple timeframe analysis to align the pattern with the broader market trend.

• Strengthen your consistency by maintaining a structured trading log to review setups, refine entries, and build confidence through data-driven analysis.

⚖️ Bump and Run Reversal vs. Head and Shoulders Pattern

Many traders recognize both patterns as reliable reversal signals, but their speed, structure, and trader psychology differ sharply.

🧠 Pattern Overview

Statement:
We tested the Bump and Run Reversal (BARR) and Head and Shoulders (H&S) setups to understand how each behaves in real market transitions.

Evidence:

• BARR setups often formed after a parabolic price surge, driven by emotional momentum and sharp volume spikes.

• H&S patterns developed over longer consolidation phases, where trend strength gradually weakened before breaking the neckline.

Insight:
BARR trades tended to trigger faster reversals with higher short-term volatility, while H&S setups offered clearer structure and smoother risk management opportunities.

📊 Backtest Highlights

Insight:
While both patterns reached similar accuracy levels, the BARR setup produced quicker payoffs, appealing to active traders. In contrast, H&S patterns were more dependable for those preferring structured, confirmation-based entries.

Traders can enhance consistency by analyzing trading history to see which reversal pattern aligns better with their risk tolerance and preferred trade duration.