Education & Information
Buy Signals
Bear Trap
The bear trap pattern is formed when a balance pattern is broken by a triple bottom indicating supply is taking over. Typically, this would be a negative pattern. However, if there is no follow through to the downside, it sets up the potential for a bear trap. When the triple bottom is broken, many short-term investors will sell. If that supply is weak it may indicate a turning point for the stock. In order for a bear trap to occur, the triple bottom should only be broken by one box. In the chart above, the triple bottom was broken at $32, but there was no follow through. If the supply is weak and the chart immediately reverses back up into a column of Xs, the triple bottom is considered a bear trap. The timing to buy is on the next three box reversal up in to a column of Xs. In the chart above that would occur at $35. This pattern can occur after an initial move up in a stocks trend or at the very bottom of a stock’s chart.