Nobody likes to fall into a trap. Yet investors may soon be falling into two traps that the stock market has potentially set up.
Let’s explore the issue with the help of a chart.
Please click here for an annotated chart of ETF S&P 500 ETF SPY which represents the S&P 500 Index SPX. Please note the following:
• The chart shows two potential traps that the stock market has set up and investors are slowly falling into.
• The potential bull trap is characterized by the breakout of stock prices above the green line shown on the chart.
• The potential bear trap is shown by stock prices falling below the orange line shown on the chart.
• Only one of these two traps will become valid.
• There is no way to know with 100% certainty which trap will become valid.
• Under these circumstances, investors ought to pay attention to Arora’s Third Law of Investing and Trading: Making investing and trading decisions based on probabilities is the only realistic and profitable approach.
Three probabilities
In our analysis at the Arora Report, the following are the probabilities:
• Bull trap coming true: 30%
• Bear trap coming true: 45%
• Whipsaws: 25%
The highest probability is the bears getting trapped. In plain English, this means there is a 45% probability of the market going higher.
Supports and target zones
Please click here to see support and target zones. For details, please see “How to trade stocks as Trump threatens China with new tariffs.”..Read more at MarketWatch.
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