As of 05/14/2021
  Indus: 34,382 +360.68 +1.1%  
  Trans: 15,917 +215.47 +1.4%  
  Utils: 908 +2.62 +0.3%  
  Nasdaq: 13,430 +304.99 +2.3%  
  S&P 500: 4,174 +61.35 +1.5%  
YTD
 +12.3%  
 +27.3%  
 +5.0%  
 +4.2%  
 +11.1%  
  Targets    Overview: 05/14/2021  
  Up arrow35,500 or 33,000 by 06/01/2021
  Up arrow17,000 or 15,000 by 06/15/2021
  Up arrow950 or 875 by 06/01/2021
  Up arrow14,600 or 12,950 by 06/01/2021
  Up arrow4,400 or 4,000 by 06/01/2021
CPI (updated daily): Arrows on 5/13/21
As of 05/14/2021
  Indus: 34,382 +360.68 +1.1%  
  Trans: 15,917 +215.47 +1.4%  
  Utils: 908 +2.62 +0.3%  
  Nasdaq: 13,430 +304.99 +2.3%  
  S&P 500: 4,174 +61.35 +1.5%  
YTD
 +12.3%  
 +27.3%  
 +5.0%  
 +4.2%  
 +11.1%  
  Targets    Overview: 05/14/2021  
  Up arrow35,500 or 33,000 by 06/01/2021
  Up arrow17,000 or 15,000 by 06/15/2021
  Up arrow950 or 875 by 06/01/2021
  Up arrow14,600 or 12,950 by 06/01/2021
  Up arrow4,400 or 4,000 by 06/01/2021
CPI (updated daily): Arrows on 5/13/21

Bulkowski on Trading Tricks & Traps

 

Initial release: 1/29/2021. Most recent update: 3/22/2021.

Experience can help sort out trades which have a higher likelihood of success from the duds, but we can also learn from researching behavior of chart patterns in the lab. Take the lab results into the field for testing can reveal unknown tricks and highlight traps setup to snare unwary traders.

This page is the gateway for tricks and traps so you can use them for larger gains and smaller losses. It's like reading about how a wrench works and then having your car break down on the side of the road. Whip out your tools and go to work.

Tricks
Elevator Stop
Pullbacks
Throwbacks
W-setup
Traps
Price Mountain
Bearish Top Trap
Bullish Top Trap

Trading Tricks

A trading trick is quirky behavior of a chart pattern or just price in general. These tips can save you money or at least prevent you from selling prematurely. They may help you better time the exit from a trade.

Elevator Stop

Elevator stop trading trick

In the elevator stop, price rises at a brisk pace. After three strong price bars, place a trailing stop a penny below the most recent low. Raise the stop as price rises each price bar, pricing it a penny or two below the bar's low. When price reverses, the stop will take you out of the trade, often near the top.

Learn more about Elevator Stops.

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Pullbacks

A pullback

A pullback happens 65% of the time, on average, after a downward breakout from a chart pattern. Price drops, curls around, and returns to (or comes close to) the breakout price within a month. After that, the stock resumes going down 59% of the time.

Traders not knowing about pullbacks can find their short position in a loss when price rises only to see the downward move resume. Find out the best way to trade pullbacks.

Learn to trade pullbacks.

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Throwbacks

A throwback

A throwback occurs in many chart patterns when the stock breaks out upward and returns to the breakout price within a month. After a throwback completes, price resumes climbing 66% of the time. Traders taking a long position may sell when the stock starts heading back toward the breakout price only to see the stock resume the upward move 84% of the time.

Learn about throwbacks and how to trade them.

Learn more about throwbacks

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W-Setup

The W-setup

Price drops for several months, forming the left side of the pattern, eventually finding support at the bottom of the W. The stock bounces but returns to support at the second bottom. After that, the stock recovers. The two circles represent individual chart patterns.

Learn more about the W-setup.

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Trading Traps

Traps are situations where a price trend is likely to fool you by reversing quickly or breaking out in an unexpected direction. Sometimes you can profit from failure (as in trading a busted chart pattern). At other times, it's best to avoid trading the stock altogether. Below is a list of trading traps which may interest you.

Price Mountain Trap

Price mountain trap

People look at the chart and say, "If price reached a high of $x, it can reach it again. Or if they bought the stock at a high price, they'll say, "I'll sell as soon as I get my money back." The problem with that thinking is it can be years (even decades) before the stock exceeds the peak of a price mountain.

Read the link for more information on the Price Mountain Trap.

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Bearish Top Trap

bearish top trap

In the Bearish Top Trap, price rises after a long uptrend, forms a peak, and then a bullish chart pattern appears. The pattern confirms as valid when price rises above the top of the chart pattern but soon runs into overhead resistance setup by the prior topping pattern. The stock reverses and down it goes, busting the upward breakout.

This is similar in shape to the Bullish Top Trap except a bullish chart pattern appears near the bottom of the setup (below overhead resistance).

Read the link for more information on the Bearish Top Trap.

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Bullish Top Trap

bullish top trap

In the Bullish Top Trap, price rises to a peak and then declines. There may be other peaks and valleys between the first peak in the setup and the start of a head-and-shoulders top (LS, H, RS). After the head-and-shoulders top confirms as a valid chart pattern, support prevents the stock from dropping more than about 10% before busting the head-and-shoulders by soaring. Works best on the weekly chart.

This is similar in shape to the Bearish Top Trap except a bearish head-and-shoulders top is at the top of the setup, above support.

Read the link for more information on the Bullish Top Trap.

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-- Thomas Bulkowski

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Trading Classic Chart Patterns

Copyright © 2005-2021 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.

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