ADA - Looking like a CLASSIC BULL TRAP - proceed with caution
Bull Trap Technical Analysis:
A bull trap chart is a bearish signal that forms in an uptrend. The most common place for bull trap to happen is in a major resistance level/zone.
It does not have to be an all time high and we are looking for a bull trap in a bullish market, not a bear market.
If the setup fits your criteria, you'd be looking to sell which would be a counter trend position during a bull market.
It is possible that you will catch a turn in trend but you should look at that as a gift.
What happens during a bull trap:
■ Price is in an uptrend and hits the resistance level, breaks it and continue to move up.
■ Breakout traders jump in with their buy orders and price shoots up
■ Traders will sell limit short are triggered in but price continues to move up and hits their stops
■ Once the liquidity dries up at these levels, price falls back inside the resistance zone
■ Traders get positioned short, the breakout traders jump in to make back their loss, short rejoin after getting stopped out
A bull trap chart is a bearish signal that forms in an uptrend. The most common place for bull trap to happen is in a major resistance level/zone.
It does not have to be an all time high and we are looking for a bull trap in a bullish market, not a bear market.
If the setup fits your criteria, you'd be looking to sell which would be a counter trend position during a bull market.
It is possible that you will catch a turn in trend but you should look at that as a gift.
What happens during a bull trap:
■ Price is in an uptrend and hits the resistance level, breaks it and continue to move up.
■ Breakout traders jump in with their buy orders and price shoots up
■ Traders will sell limit short are triggered in but price continues to move up and hits their stops
■ Once the liquidity dries up at these levels, price falls back inside the resistance zone
■ Traders get positioned short, the breakout traders jump in to make back their loss, short rejoin after getting stopped out
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