Bull and bear traps are perhaps the simplest and at the same time one of the most reliable charting configurations to look out for in technical analysis. At the same time the money management point on such situations is very often relatively tight and perhaps most important of all, obvious. In the case of Octagonal the setup we are looking at for the start of 2015 comes in the wake of the December bear trap rebound from below the old May support at 0.23p. Given where the shares are currently at 0.27p, just above the former spring support we see acceptance for the May low.
At the same time an end of day close back below this level would hint that the implied return to the best levels of 2014 at 0.5p and beyond. Those who would not like to trade the shares quite so tightly would allow down to the 0.18p December low in terms of giving Octagonal the benefit of the doubt. However, it should be evident over the next 1-2 months that this stock heads back towards post September resistance at 0.5p, and of course the deeper stop loss rather takes away the advantage of the classic bear trap setup. This is particularly so given the extra momentum provided by the RSI oscillator breaking back above the neutral 50 level to stand at 55.
