Bull Trap After Bear Trap!
Updated
Composite Man loves tricking us. We were expecting a secondary test (ST) but it gave us a spring and wanted us to think this was the bottom. In fact what he gave us was a bear trap!
How do we know this wasn't the spring we were looking for? By looking at the volume. The reason these shakeouts are made is to make sure supply is exhausted. When it happens we should have low volume. If you look at the volume of the shakeout on the 22nd, you'll notice it's the third highest bar in the trading range, almost on par with the second highest volume. If you also watched this bar closely while it was in the making, it was a red bearish candle almost all day. The moment it became clear that the supply is far from being exhausted, composite man started buying and his next trick begun: the bull trap.
This time the Composite Man gave us a breakout of the downtrend, but wait does that really look like a breakout to you? I mean look at how slowly price has recovered 3/4 of it's loss in 3 days, which it lost in just one day and still trying! Look at the decreasing volume in contrast with so called "rally". This is a weak, fake breakout and a trap, this time for the bulls.
As you can see it's getting dirty. Try zooming out when in doubt. Let's look at weekly chart for example:
We have 3 more days to close this weeks candle. How do you think this week will close and more importantly what will the next week look like given the bearishness?
Wyckoff isn't interested in volatile and sideways markets. He wants to trade with the trend, therefore, we will wait patiently until a clear trend arise with correct signals!
Trade safe!
How do we know this wasn't the spring we were looking for? By looking at the volume. The reason these shakeouts are made is to make sure supply is exhausted. When it happens we should have low volume. If you look at the volume of the shakeout on the 22nd, you'll notice it's the third highest bar in the trading range, almost on par with the second highest volume. If you also watched this bar closely while it was in the making, it was a red bearish candle almost all day. The moment it became clear that the supply is far from being exhausted, composite man started buying and his next trick begun: the bull trap.
This time the Composite Man gave us a breakout of the downtrend, but wait does that really look like a breakout to you? I mean look at how slowly price has recovered 3/4 of it's loss in 3 days, which it lost in just one day and still trying! Look at the decreasing volume in contrast with so called "rally". This is a weak, fake breakout and a trap, this time for the bulls.
As you can see it's getting dirty. Try zooming out when in doubt. Let's look at weekly chart for example:
We have 3 more days to close this weeks candle. How do you think this week will close and more importantly what will the next week look like given the bearishness?
Wyckoff isn't interested in volatile and sideways markets. He wants to trade with the trend, therefore, we will wait patiently until a clear trend arise with correct signals!
Trade safe!
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