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The trap we’re going to look at today is called a trap break pullback failure trap. This trap occurs when traders believe that at the hard right edge a level of resistance is going to hold, but instead of that happening, price actually breaks through the level, trapping those traders in those short positions. When price comes back into the level, those traders will exit the positions and that’s why we see a bump in price there.
However, this move doesn’t follow through and is now trapping those traders on the wrong side of this level. If you get a drop on a pullback into that area there, this looks like a decent short, but make sure the stock market is still selling off when you consider taking this trade.
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