Breakout Or Bear Trap?
Trader Moe | Oct 23, 2014 01:44AM ET
The purple megaphone on the S&P 500 chart makes the late-day breakout through the pink megaphone VWAP and navy blue rising wedge a possible bear trap.
On the other hand, though a retest of the purple megaphone VWAP is still required, that retest would now mean only a retest of the formations just broken out of.
I would no longer be long here, because there’s a risk of a big overnight drop (green scenario), and even if the price ends up breaking out the top of the purple megaphone (purple scenario), you’ll have another entry to get long on any big move.
If you’re trading futures, I’d wait for the retest of VWAP and then bet the breakout past today’s low if it happens. Otherwise I’d stay long.
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