• : January 23, 2021
  • : Prashant Shah

Traps: Follow-through and Variation

We discussed about Bear Trap and Bull Trap formations during last Newsletter. We discussed that:
  • Bear Trap is a bullish pattern, Bull Trap is bearish pattern
  • Bothe are objective four-column patterns
  • Bear Trap in uptrend (above moving average) is more bullish and Bull Tap in downtrend (below moving average) is more bearish
  • Bear trap when average line is rising is Rising Bear trap pattern
  • Bull trap when average line is falling is Falling Bull trap pattern
At times, pattern is strong, but stop-loss is not affordable. Follow-through pattern is a strong and objective pattern of Point & Figure charts which is useful from practical trading perspective.

Double-top buy pattern after Bear Trap is a Bullish Bear Trap Follow through pattern. Double Bottom sell pattern after Bull Trap is a Bearish Bull Trap Follow through pattern.



Follow-through works as a confirmation to the trap pattern and also provides affordable trading opportunity.

Variation

We discussed that double top buy immediately followed after double bottom sell is a Bear trap pattern. The idea is that Bearish pattern did not witness a follow through and failed immediately. It shows strength of the bulls and weakness of the bears.
At times, pattern doesn’t get failed immediately, it happens after a column making it a six-column pattern. It is a variation of trap pattern.

Double bottom sell followed by Double top buy after a column is a six-column Bear Trap variation pattern.



Double top buy followed by Double bottom sell after a column is a six-column Bull Trap variation pattern.



A P&F column represents a swing move. Remember, A six-column pattern on daily chart doesn’t mean six- day pattern. It shows a pattern over last six swing moves.

If we draw a line connecting these swing points, it will look like below:



Let me show that removing P&F behind it



They look like Head and Shoulder and Inverted Head and Shoulder pattern. Essence of the bullish pattern is – bearish pattern is followed by a bullish pattern.

Defining the pattern on P&F chart makes it objective and scannable on any timeframe and instrument.

We have discussed follow-through and variation of Trap pattern. Check what we discussed during last week and explore the concepts. Try drawing this pattern on a piece of paper, it will help you to gain better understanding of the pattern and give you more ideas.