Kensington group has just formed the perfect Bump and run reversal formation.

And yes i do mean perfect. The lead-in line is at 45 degrees the run is about 55.

Lead-in Phase: The first part of the pattern is a lead-in phase that can last 1 month or longer and forms the basis from which to draw the trendline. During this phase, prices advance in an orderly manner and there is no excess speculation. The trendline should be moderately steep. If it is too steep then the ensuing bump is unlikely to be significant enough. If the trendline is not steep enough, then the subsequent trendline break will occur too late. Bulkowski advises that an angle of 30 to 45 degrees is preferable. The size of the angle will depend on the scaling (semi-log or arithmetic) and the size of the chart. It is probably easier to judge the soundness of the trendline with a visual assessment.

Bump Phase: The bump forms with a sharp advance, and prices move further away from the lead-in trendline. Ideally, the angle of the trendline from the bump's advance should be about 50% greater than the angle of the trendline extending up from the lead-in phase. Roughly speaking, this would call for an angle between 45 and 60 degrees. If it is not possible to measure the angles, then a visual assessment will suffice.

Bump Validity: It is important that the bump represent a speculative advance that cannot be sustained for a long time. Bulkowski developed what he calls an "arbitrary" measuring technique to validate the level of speculation in the bump. The distance from the highest high of the bump to the lead-in trendline should be at least twice the distance from the highest high in the lead-in phase to the lead-in trendline. These distances can be measured by drawing a vertical line from the highest highs to the lead-in trendline. An example is provided below.

Bump rollover: After speculation dies down, prices begin to peak and a top forms. Sometimes a small double top or a series of descending peaks forms. Prices begin to decline towards the lead-in trendline and the right side of the bump forms.

Volume: As the stock advances during the lead-in phase, volume is usually average and sometimes low. When the speculative advance begins to form the left side of the bump, volume expands as the advance accelerates.
Run Phase: The run phase begins when the pattern breaks support from the lead-in trendline. Prices will sometimes hesitate or bounce off the trendline before breaking through. Once the break occurs, the run phase takes over and the decline continues.

Support turns resistance: After the trendline is broken, there is sometimes a retracement that tests the newfound resistance level. Potential support-turned-resistance levels can also be identified from the reaction lows within the bump.



The share price has now got ahead of itself, having been in a steady uptrend excess speculation has caused kgn to rally to levels which are unsustainable.

Kgn will fall to the lead-in line at 220p+,bounce off it and eventually fall through. Prices of less that 2 is expected medium term. The lead in is from lows of 130p to 210p. Then from 210p to 280p is the bump and run taking kgn to unsustainable levels.

Has also been tipped as a sell:

Kensington Group (KGN) 260p sell
by: Timon Day

It is hard to be confident about Kensingtons ability to grow profits when house prices are falling in London and the buy-to-let market is faltering. Estate agent Countrywide Assured is another share to avoid. Kensington director Martin Finegold sold 1.1 million shares last week, cutting his stake to 25%.

The company provides mortgages to borrowers who find it difficult to obtain a loan from other lenders as they tend to be self-employed, contractors, freelances; have an adverse credit history; or are simply too old.

Admittedly, the recent trading statement was upbeat. Kensington is confident that current-year profits will meet market expectations of around 35 million profits against 30 million last year.

Mortgage completions for the five months to end-April were up 110% at 700 million helped by acquisitions such as The Mortgage Lender company bought last September. Chief executive John Maltby sounds a note of caution, saying he expects this exceptional rate of growth to slow.

The performance of the loan portfolio is strong with arrears and loan losses at low levels and credit rating company Fitch has upgraded Kensington debt. During the first half of 2002, the company securitised 450 million of mortgage lending through various bond issues. A high credit rating is essential to the companys financial health as debt amounts to almost twice shareholders funds.

Any rise in interest rates, though unlikely in the short term, is bad news as net borrowings of 165 million will cost more to service. Interest cover amounted to 1.32 times last year.

But the real crunch will come if unemployment rises in Britain and Kensingtons lenders fall into arrears. If bad debts rise and the company has to start making repossessions of property, matters could get sticky.

The most likely scenario is a fall in lending as house buyers stay on the sidelines and the buy-to-rent boys get cold feet as rents and house prices continue to fall.

The shares have had a great run this year after more than halving from a peak of 298p to 140p last year. The downside is greater than the upside. Stop loss 210p. (See Directors Dealings.)

This is a major short imo