Blow Off Top? Or Bull TRAP? 🪤
The Game Plan for Both Situations...UP or DOWN
“Tim…you said Blow Off Top…but now you are talking about a Bull Trap?!”
To be fair…a blow off top is essentially a massive bull trap. Information has changed over the last few days with oil prices presenting an ominous signal. If you didn’t see my latest post about oil price action being a leading indicator, you can watch it here. Additionally, this post is more for those who want to actively trade the markets and are well versed in the utilization of stops. Long term investing, in my opinion, remains to be a bad choice; you can read more on that here.
Now, I will be trading QQQ 0.00%↑ and SQQQ 0.00%↑ predominantly. This same strategy can be applied for SPY 0.00%↑ .
If you are interested in the strategy, here are the details 👇
Lets address the elephant in the room first: Blow off top or bull trap? I wish it were that simple predicting the future…but it is not. My short answer is: it could be both.
We have not cancelled the blow off top….simply following price action trends. This has kept us out of hot water and even returned a few profits. But we have volatility contraction patterns (VCP) developing. This is higher lows and a relatively flat price ceiling. Do be aware, VCP’s have higher probabilities of working in a trending bull market…which we are technically in a bear market right now.
Now, lets start off with what we KNOW…and bear with me as I am going to walk the dog on this one a bit. We know that the market can ONLY do 1 of 3 things…go up, go down, or go sideways. “DUH TIM!”. As a breakout trader myself, we are seeking a breakout from the consolidation (the VCP), labeled in white.
The breakout from the consolidation will, in the near future, present a big red candle, or a big green candle. Remember, we are not trying to get “perfect prices”….we are trying to capture a PIECE of a trend. Do not try to get perfect tops or bottoms…you will almost always fail. So what does a “big red” or “big green” candle look like? It will be a definitive statement in price action saying, that at least short term…price action is going to go one direction. Typically it will look something like the below 👇: