GLOSSARY // Technical Analysis
Bull Trap
A bull trap is a breakout above resistance that fails almost immediately, reversing back below the level and stranding the buyers who chased the break. The failed move often accelerates the reversal: trapped longs selling their stopped-out positions become the fuel for the drop.
Traps tend to share a signature — the breakout comes on below-average volume, pokes marginally above the level, and cannot hold it on a closing basis. Confirmation filters exist precisely for this pattern: requiring a close above resistance, a retest that holds, or 1.5-2x average volume on the break trades some early entries for far fewer traps.
A stock has tested $25.00 resistance four times. It breaks to $25.40 mid-morning on volume 40% below its average breakout volume, stalls, and by the close is back at $24.10. Breakout buyers at $25.10 with stops under the level are out for a fast loss, and their selling helps drive it to $23.30 the next day. The tell was the volume: real breakouts from a four-touch level rarely happen on a quiet tape.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.