Oops! Pattern
Originally identified and named by Larry Williams, this is another term used to describe a bull or bear gap trap formation. It happens when price closed near highs after several days of buying and then gaps lower the on the next period and opens under the its lows (vice versa on a down move). The entry is signaled when the market touches either the low to go long or the high to go short.
The theory behind this pattern is that uninformed players check their charts after the close and place orders for the next day, instead of waiting for the next day's open to make a decision. When informed players see that the open is substantially lower or higher than the previous days trading range, their interpretation is that the uninformed players are panicking and desperate to enter the market. Informed players use these opportunities of extreme emotion to place trades in the opposite direction of the general public.
