Bull Trap
Candle A in the chart above is an excellent bull trap.
Firstly, candle A occurred near a bullish trendline and it seemed like price found support at the trendline. In addition, candle A is an outside bar and a strong bull candle. All these signals suggest that price might bounce off support and continue to rally.
However, that was not the case. Price moved up a bit, but then proceeded to fall.
One of the biggest clue to suggest that price will NOT rally and that candle A is merely a bull trap is the fact that previously, price failed to find support at the brown trendline. The brown trendline acted as a resistance initially. After price broke above the brown trendline, the line should change it’s role and function as a support. However, this did not happen in the chart above. Traders who were alert will probably detect that something is amiss, and will not be tricked into buying above candle A.
