Possible Bull Trap
by Carl Swenlin
February 19, 2010
Last week we were looking at a bearish reverse flag formation, but this week prices broke above a short-term declining trend line, effecting a bullish resolution of the flag and changing the short-term outlook to bullish. This was confirmed by a PMO (Price Momentum Oscillator) buy signal, generated as the PMO crossed up through its 10-EMA.
The negative side of the picture is that volume accompanying the breakout and subsequent advance only has been averaging about 85% of the 250-EMA of daily volume, which does not reflect broad confidence in the move. This, plus other evidence we will discuss, makes me think the breakout could be a bull trap.
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