A bull trap is a deceptive movement in the stock market that lures investors into buying a security stock with the false impression that its price is rising and will continue to climb.
Downtrend: The price of a security has been declining for some time.
Short-term Rebound: Suddenly, the price starts to rise sharply, creating the illusion of a reversal in the downtrend.
Buying Frenzy: Bullish investors, believing the downtrend is over, jump in to buy the security, expecting further price increases.
The Reality:
* Temporary Uptick: The price increase is often short-lived and unsustainable.
* Selling Pressure: When the initial buying frenzy subsides, sellers overwhelm the market, driving the price back down, often even lower than before the trap.
* Losses for Investors: Investors who bought during the uptick end up holding a security whose price is now even lower.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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