The trap we’re going to look at today is what I refer to as a structure failure trap and an outside candle trap, which occurred in this area here. Traders at the hard right edge, after this strong move up to new highs, would’ve believed that this retracement back into this prior level of resistance would be a great place to go long. So, you can see we’ve got some bull candles and this candle had been very bullish in real time, but it turned and flipped, and this is the outside candle trap.
As you can see, prices didn’t follow through and have since broken down strongly beyond that point. As I’ve said before, I believe that humans aren’t great with discipline, so there’s a number of traders in here who are losing money. And if you’ve ever held on to a loser too long, took too much risk before, or you’ve hemorrhaged outside of the discipline of taking a good trade, then you know this to be true.
Price has now pulled back into this level, so if we get some selling in here, this looks like a pretty good place to get short.