Intra-Day Action Journal- 1 March 2016: Bear Traps – The “Gotcha Bar” Pattern

Today was a strong Bullish trend day that yielded some great low risk entry’s coupled with some excellent Bear traps. I was long SPY in the morning for +$795.00 and long again in the afternoon for + $1,070. Positive +$1865 for the day. I’m happy with that but I did leave some money on the table with a few mistakes here and there. 

The “Gotcha Bar” pattern is one of my favorite intraday setups. Here what I look for in a gotcha bar reversal.

Bullish Gotcha Bar:

For better results I like to see a trend that has been established but it does work without it.

Basically I’m looking for a breakdown bar off a swing high. That reverses and creates a buying tail (bottom tail). Keep in mind at some point the candle was a large bearish red candle that the Bears were selling. This creates the breakdown pattern that traders recognize and pile in.

However, price starts to reverse and closes with a buying tail that catches these traders on the wrong side. This is the start of a strong reversal as Bears have to buy to cover plus the bulls that recognize the pattern start buying….Gotcha Bar!

Add the risk ladder on your side and the TICK with neutral to -500 and you have a good reversal signal to go long.

I have marked 4 instances today of breakdown failures (gotcha bars) that worked beautifully. Take a look at the pattern and the corresponding TICK levels. Make a mental note and next time you see this starting to take shape intraday you can paper trade the setup until you have confidence that it works for you.

Of course the reverse is also true of a Bearish Gotcha Bar pattern (breakout failure). Breakout failures can be even more powerful. Price can fall hard when the fear sets in and the breakout traders realize they are on the wrong side. The short sellers take advantage of the gotcha bar this leads to downside moves that can be hard and fast.

If you have any questions please leave a comment. I’m happy to help.