Education & Information
Sell Signals
Bull Trap
The bull trap pattern is formed when a balance pattern is broken by a triple top indicating demand is taking over. Typically, this would be a positive pattern. However, if there is no follow through to the upside, it sets up the potential for a bull trap. When the triple top is broken, many short-term investors will buy. If that demand is weak it may indicate a turning point for the stock. In order for a bull trap to occur, the triple top should only be broken by one box. In the chart above, the triple top was broken at $43, but there was no follow through. If the demand is weak and the chart immediately reverses back down into a column of Os, the triple top is considered a bull trap. The timing to sell is on the next three box reversal down in to a column of Os. In the chart above that would occur at $40. This pattern can occur while the stock is already in a major down trend or at the very top of a stock’s chart. If it occurs at the top, a major trend change can occur.