Bear trap

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«When you have to make a choice and don't make it,
that is in itself a choice.»

(William James)

A bear trap is a false break-out on the downside occurring after a trading range. Investors sell their shares once the price has broken out of the congestion, but then the price quickly reverts its movement returning above the violated level.

Candlestick analysis provides quite a good help in qualifying the nature of price movements and this is the reason why it can be very useful in identifying bear traps.

Bear trap.png

See also: