IS RUPEE FORMING BUMP AND RUN REVERSAL??
28 September 2018
As the name implies, the Bump and Run Reversal (BARR) is a reversal pattern that forms after excessive speculation drives prices up too far, too fast. It is identified in three main phases to the pattern: lead-in,bump, and run.
Lead-in Phase: The lead-in phase formed over a 3 month period from early June to August this year. During this phase, USD/INR prices advanced in an orderly manner and there was no excess speculation. The trend line was moderately steep. The rally in USD/INR between 65-68.40 denote the lead in Phase.
Bump Phase: The bump phase began in August and might last till few days more. The bump forms with a sharp advance, and prices move further away from the lead-in trend line. Ideally, the angle of the trend line from the bump's advance should be about 50% greater than the angle of the trend line extending up from the lead-in phase. Here in Rupee the bump phase is between 68.40-72.70.
Bump Validity: The distance from the lead-in phase's highest high to the trend line was Rs 1.18. The distance from the bump phase's highest high to the trend line was Rs 3.54. This is almost three times larger, and validates the speculative excesses in the bump.
There is 2 trend reversal formation seen in the pair , one with a Triple top formation at 72.95 and second the Bump and bear Reversal. While one can wait to see the break of 72.30 trend line before selling for the target of 70.30-70.50 levels which will be the trend line support .A break of 70.50 will be needed to confirm the medium term trend reversal in the rupee as shown in the below diagram shown for understanding purpose. The failure for both the technical pattern will break of 73.10 on upside. Only time will tell. Let see!
Example of Bump and Run Reversal
Regards,
Nitesh Sharma
Routeforex Solutions Pvt Ltd.
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