Can Bear Traps Be Avoided?

In this Chart of the Week,  

We review the Dow Jones Industrials and the Bear Trap.

We conduct a review every week, and in this Chart of the Week, I'll share the results.

The Advisory Swing and Options Trader Letter provides an overview of the broader markets, sectors, internal market gauges, and a market bias for the upcoming week.

And continuing education in Master Trader Technical Strategies.

Below is the review of the Dow Jones Industrials from the March 31, 2025, Advisory Swing Letter.

Bear traps can’t be eliminated entirely, but using technical analysis, multi-timeframe confirmation, and market internals can greatly reduce the risk of falling into one.

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The chart above is the Dow Jones Industrial Average, which we review for MTS education and information.

Technically, the confusion in the price patterns from the previous week persisted this week.

The Bottoming Tail (BT) that formed on Friday before last suggested a move higher. The significant gap higher and strong close last Monday, followed by consolidation on Tuesday, supported the potential for an additional move higher.

Tuesday’s consolidation day, marked by overlapping candles to the left, demonstrated bullish price action.

Aggressive short-term swing traders would look for a move toward the area below the 50-MA, and intra-day trading would look for a confirming pattern on shorter time frames.

The bullish price action that followed on Wednesday morning, when the Dow traded above Tuesday’s high and below it, turned out to be a “Bull Trap.”

The news of tariffs on Thursday, which continued on Friday, solidified the trap in what has been a “schizophrenic” market environment.

Master Trader Tip: The future is uncertain, and the price action leading up to Wednesday’s reversal suggested the potential for an additional move higher. Aggressive traders would want to capitalize on that potential move.

Conservative traders would’ve considered that the downtrend takes precedence over the short-term bullish price action and would stand aside.

Both approaches are correct based on personal trading plans and money management.

On a short-term basis for a countertrend trade, had Wednesday turned into a BT bar, which would’ve also been a correction bar, the odds of a move toward the area of the declining 50-MA would’ve been much greater.

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