Bull Trap
A false breakout above resistance that lures buyers into long positions just before prices reverse lower.
What is Bull Trap?
A bull trap is a misleading price signal in which a security appears to break above a key resistance level, enticing buyers to enter long positions in anticipation of continued upside — only for prices to quickly reverse and fall back below resistance, leaving the buyers with losses. Bull traps frequently occur near all-time highs, key moving averages, or round-number price levels when buying momentum exhausts and institutional sellers begin distributing shares into retail demand. Low volume on the breakout, bearish divergences in momentum oscillators such as the RSI, and failure to close above resistance on a daily or weekly basis are common warning signs. Bull traps are especially prevalent during bear market counter-rallies.
Example
A stock consolidates just below $100 resistance for two weeks before breaking above to $102 on moderate volume. Retail traders buy expecting a continuation to $110. Three sessions later the stock reverses to $92 as institutional sellers absorb the move, trapping late buyers with immediate unrealized losses.
Source: Investopedia — Bull Trap