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+====== P&F Bull & Bear Traps ======
+===== Introduction =====
+Bull and Bear Traps are P&F signals that quickly reverse. In particular, a Bull Trap is a Multiple Top Breakout that reverses after exceeding the prior highs by one box. A Bear Trap is a Multiple Bottom Breakdown that reverses after exceeding the prior lows by one box. Bull and Bear Traps provide quick indications of a signal failure, but chartists should be careful not to get caught in a catapult.
+===== Bull Trap =====
+A Multiple Top Breakout includes a Triple Top Breakout, a Quadruple Top Breakout and anything wider. A Triple Top Breakout occurs when two successive X-Columns form equal highs and the next X-Column breaks above these highs. A Quadruple Top Breakout is similar to a Triple Top Breakout, but with three successive X-columns forming equal highs instead of two. For a Bull Trap to be possible, this breakout can only be one-box. Breakouts that move two or more boxes above resistance do not qualify. The Bull Trap occurs when prices reverse after a one-box breakout and the subsequent O-Column moves at least three boxes lower. A one-box breakout is not that strong and the immediate reversal shows renewed selling pressure.
+{{:chart_analysis:pnf_charts:pnf_traps:pnftrap-1-apo-bull.png|P&F Bull Bear Traps - Chart 1}}
+The chart above shows Apollo (APOL) with a Bull Trap in April 2010. First, the stock forged a Triple Top Breakout as the third X-Column exceeded the prior two by one box. Second, this breakout quickly failed as the stock formed a three-box reversal. This O-Column broke below the prior O-Column to forge a Double Bottom Breakdown and fully negate the Triple Top Breakout.
+===== Bear Trap =====
+A Multiple Bottom Breakdown includes a Triple Bottom Breakdown, a Quadruple Bottom Breakdown and anything wider. A Triple Bottom Breakdown occurs when two successive O-Columns form equal lows and the next O-Column breaks below these lows. A Quadruple Bottom Breakdown triggers when three successive O-Columns form equal lows and the next O-Column breaks below these lows. For a Bear Trap to be possible, this breakdown can only be one-box. Breakdowns that move two or more boxes below support do not qualify. The Bear Trap occurs when prices reverse after a one-box breakdown and the subsequent X-Column moves at least three boxes higher. A one-box breakdown is vulnerable to whipsaw and the immediate reversal shows renewed buying pressure.
+{{:chart_analysis:pnf_charts:pnf_traps:pnftrap-2-sna-bear.png|P&F Bull Bear Traps - Chart 2}}
+The chart above shows Snap On (SNA) with a Quadruple Bottom Breakdown in August 2010. Notice that SNA broke support with only one box or one X below the prior three lows. This breakdown did not last long as the stock quickly reversed and forged a three-box reversal. The rising X-Column extended to forge a Double Top Breakout that fully negated the Quadruple Bottom Breakdown.
+===== Bullish Catapults =====
+Bull and Bear Traps can sometimes fail and evolve into catapults - kind of like a double trap. A Bullish Catapult forms with a Triple Top Breakout, a pullback into the pattern and then a Double Top Breakout. A one-box Triple Top Breakout and a pullback into the pattern qualify as Bull Trap. Chartists should be careful because the Triple Top is a congestion area that represents a support zone. While the pullback into the pattern shows hesitancy for the bulls, it takes a Double Bottom Breakdown to produce a bearish P&F signal that would fully counter the original Triple Top Breakout.
+{{:chart_analysis:pnf_charts:pnf_traps:pnftrap-3-vrtx-buca.png|P&F Bull Bear Traps - Chart 3}}
+The chart above shows Vertex Pharma (VRTX) with a Multiple Top Breakout in October 2010. The breakout X-Column exceeded the prior four highs by one box. This breakout did not last long as the stock reversed with a decline back into the congestion zone (green box). The lows of this zone ultimately held and the stock forged a Double Top Breakout on the next upturn. The Bull Trap failed and evolved into a Bullish Catapult.
+===== Bearish Catapults =====
+The opposite holds true for Bear Traps, which can evolve into Bearish Catapults. These patterns form with a Triple Bottom Breakdown, a bounce back into the pattern and then Double Bottom Breakdown. Technically, a one-box Triple Bottom Breakdown and a bounce back into the pattern qualify as a bear trap. Chartists should be careful because the Triple Bottom is a congestion area that represents a resistance zone. While the bounce back into the pattern shows resilience, it takes a Double Top Breakout to produce a bullish P&F signal to fully counter the original Triple Bottom Breakdown.
+{{:chart_analysis:pnf_charts:pnf_traps:pnftrap-4-unum-beca.png|P&F Bull Bear Traps - Chart 4}}
+The chart above shows Unum Group (UNUM) with a Triple Bottom Breakdown. Notice that this support break occurred with just one box (one O below the prior two O-Columns). The breakdown did not last long as the stock reversed higher to forge a Bear Trap. However, the Bear Trap did not last long either as the stock turned back down and broke below its prior low. The combination of a Triple Bottom Breakdown and Double Bottom Breakdown forged a Bearish Catapult.
+===== Conclusion =====
+Bull and Bear Traps serve as an early warning system for chartists that a signal is failing. However, traps are not perfect signals and may instead evolve into catapults. When looking at a bull trap, look at the size of the congestion zone and identify support. A pullback that holds above support could be just that, a pullback. When looking at a bear trap, be sure to identify congestion zone resistance. A bounce back into this resistance zone could simply be an oversold bounce. Chartists should employ other aspects of technical analysis to confirm signals on P&F charts.
+===== Further Study =====
+Thomas Dorsey's //Point & Figure Charting// examines the basic ideas and key patterns of P&F charts. Dorsey keeps his analysis simple and straightforward; as a relative strength disciple, he devotes a complete chapter to relative strength concepts using P&F charts. These concepts are tied in with market indicators and sector rotation tools to provide investors with all they need to construct a portfolio. Additionally, Dorsey incorporates lessons on how to use P&F charts with ETFs.
+//The Definitive Guide to Point and Figure//, by Jeremy du Plessis, lives up to its title and is required reading for the Chartered Market Technician exam. Chartists can learn about 1-box P&F patterns/counts, 3-box patterns/counts and various trading strategies. du Plessis also shows how to apply P&F charting techniques to other analysis tools, such as relative strength and Fibonacci retracements, using plenty of real-world examples are provided throughout the text.
+|  **Point & Figure Charting**\\ Thomas Dorsey  |  **The Definitive Guide to Point and Figure**\\ Jeremy du Plessis  |
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