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Bull trap

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A Bull Trap is in economy context an untruthful signal that shows a lessening trend in a stock or index has reversed and is heading upwards when, in fact, the security will continue to decline.

This ploy supposedly indicates that is reversing its path, and is starting to rise instead of decline, but in actuality the security continues to decline after this signal is seen. It is seen as a trap because the outcome makes concede this signal to purchase the stock by the credence given the benefit from this increase in value, but it's trapped with a poor performing stock when they find out that the stock is still falling.

References

  • Setting the Bull Trap (investorinsight.com) [1]
  • Don’t Fight A Bull Trap (stocks-simplified.com) [2]