As of 03/05/2021
  Indus: 31,496 +572.16 +1.9%  
  Trans: 13,628 +408.32 +3.1%  
  Utils: 814 +13.86 +1.7%  
  Nasdaq: 12,920 +196.68 +1.5%  
  S&P 500: 3,842 +73.47 +1.9%  
YTD
 +2.9%  
 +9.0%  
-5.9%  
 +0.2%  
 +2.3%  
  Targets    Overview: 02/26/2021  
  Up arrow32,750 or 30,700 by 03/15/2021
  Up arrow14,500 or 12,900 by 03/15/2021
  Up arrow850 or 770 by 03/15/2021
  Up arrow14,200 or 12,700 by 03/15/2021
  Up arrow4,000 or 3,700 by 03/15/2021
CPI (updated daily): Arrows on 3/5/21
As of 03/05/2021
  Indus: 31,496 +572.16 +1.9%  
  Trans: 13,628 +408.32 +3.1%  
  Utils: 814 +13.86 +1.7%  
  Nasdaq: 12,920 +196.68 +1.5%  
  S&P 500: 3,842 +73.47 +1.9%  
YTD
 +2.9%  
 +9.0%  
-5.9%  
 +0.2%  
 +2.3%  
  Targets    Overview: 02/26/2021  
  Up arrow32,750 or 30,700 by 03/15/2021
  Up arrow14,500 or 12,900 by 03/15/2021
  Up arrow850 or 770 by 03/15/2021
  Up arrow14,200 or 12,700 by 03/15/2021
  Up arrow4,000 or 3,700 by 03/15/2021
CPI (updated daily): Arrows on 3/5/21

Bulkowski on Avoiding Pattern Traps

 

Initial release: 1/29/2021

Chart patterns fail from time to time. This page serves as the gateway to what I hope will be a series of articles explaining situations where a chart pattern is more likely to fail... or succeed. I call them traps.

A significant portion of this website discusses candlesticks, event, and chart patterns individually. If you read the articles, you'll understand how often they work and if you trade them perfectly, how much you could make, on average.

This page links to articles which try to put chart patterns into the price landscape. 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 wrench and go to work.

The Top Trap

flat top trend

In the 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.

See the figure on the right.

If you see a bullish chart pattern form just after the stock peaks, avoid trading it. Buy in later, carefully, after price closes above the peak. Be alert because the uptrend may reverse quickly. I suggest you look elsewhere for a better chart pattern setup to trade.

Read the link for more information on the Top Trap.

-- Thomas Bulkowski

Top of page

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 Encyclopedia of Chart Patterns 2nd Edition 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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