Bull Trap: How Often Do Breakouts Really Fail? 35 Years of Data

Short answer: a bull trap is a breakout above resistance, often a previous high, that pulls buyers in and then fails, so the price drops back below the level it just cleared. It is the opposite of a bear trap. The phrase gets used a lot, but our own data shows that true bull traps are rarer than they feel. We tested every fresh breakout to a new 52-week closing high in the S&P 500 since 1991, 28 in total. 16 of them slipped back below the old high within ten trading days, which is what a bull trap looks like on day five. But only 4 fell 5% or more below the breakout level over the following three months, and 25 of the 28 were higher one year later.

Bitcoin is a different story. Of five breakouts above a prior all-time closing high since 2020, one of them, in October 2021, turned into one of the costliest bull traps of the decade: Bitcoin closed at a record $67,567 on November 8, 2021, and a year later it was at $15,787, down 76.6%.

This article explains what a bull trap is, shows the full breakout record for both markets, and gives the checklist traders use to tell a real breakout from a trap. All figures come from Yahoo Finance daily closes for the S&P 500 (^GSPC, January 1990 to October 14, 2026) and Bitcoin (BTC-USD, September 2014 to October 15, 2026), retrieved and calculated on October 15, 2026.

What is a bull trap?

A bull trap happens in three steps. First, a price that has been capped by a clear level, such as a previous high, a range top or a falling trendline, pushes through it. Second, that breakout draws in buyers: traders who were waiting for confirmation, short sellers forced to cover, and momentum systems that buy new highs. Third, the buying runs out, the price falls back through the level, and the people who bought the breakout are now holding losses. They are "trapped" long, and when they sell to get out, the fall speeds up.

The name mirrors the bear trap, where a breakdown below support reverses higher and traps short sellers. Both belong to the family of failed breakouts. A bull trap is also related to a dead cat bounce, but they are not the same. A dead cat bounce is a short rally inside a falling market that does not reach a new high. A bull trap is a move that does make a new high, or clears an important level, and then fails. One fools people who think the bottom is in; the other fools people who think the next leg up has started.

Why traps happen

Previous highs are where many traders place orders. Sellers who bought near the old top and sat through a loss often sell once they get back to break-even. Short sellers put their stop-losses just above the high. Breakout traders put buy-stops there too. When the price touches the level, all of those orders fire at once. That produces a quick spike in buying, but much of it is one-time buying: shorts closing and stops triggering, not new investors with a long-term view. If no fresh demand arrives after that burst, there is nothing left to hold the price up, and supply from break-even sellers takes over.

That is why a common description of a bull trap is "a breakout on fading volume". The burst of activity at the level is real, but it is not followed by the steady buying that a durable new trend needs.

Our test: every fresh S&P 500 breakout since 1991

To see how often breakouts in the stock market actually fail, we used a simple, repeatable rule. A fresh breakout is a day when the S&P 500 closes above the highest close of the previous 252 trading days (about one year), and when there has been no such new 52-week closing high for at least 60 trading days before it. The 60-day gap matters: it removes the hundreds of routine new highs that come in a row during a strong uptrend and keeps only the moments when the index broke out of a pause, a pullback or a bear market. Those are exactly the moments when "is this a bull trap?" gets asked.

For each breakout we measured three things: whether the index closed back below the old high at any point in the next ten trading days; the deepest close below the old high in the next 60 trading days; and the price return 60 trading days and 252 trading days later. Using closing prices only, the data from January 1990 produced 28 fresh breakouts between February 1991 and June 2025.

The full record

Breakout date	Old high	Breakout close	Back below within 10 days?	Worst close vs old high (60 days)	Return after 60 days	Return after 1 year
Feb 13, 1991	368.95	369.02	Yes	-1.7%	+1.8%	+13.0%
Aug 6, 1991	390.45	390.62	Yes	-3.6%	+0.6%	+8.6%
Jul 29, 1992	420.77	422.23	Yes	-4.3%	-1.7%	+5.9%
Aug 19, 1993	456.33	456.43	Yes	-0.7%	+2.0%	+1.5%
Feb 6, 1995	478.65	481.14	No	+0.3%	+8.2%	+33.3%
May 13, 1996	661.45	661.51	No	-5.3%	+0.4%	+26.6%
Sep 13, 1996	678.51	680.54	No	+0.4%	+10.2%	+35.8%
Nov 23, 1998	1,186.75	1,188.21	Yes	-3.8%	+7.1%	+18.2%
Nov 16, 1999	1,418.78	1,420.07	Yes	-4.1%	-2.3%	-2.6%
Sep 2, 2003	1,011.66	1,021.99	Yes	-1.6%	+3.1%	+8.2%
Nov 4, 2004	1,157.76	1,161.67	No	+0.4%	+2.4%	+5.0%
Jul 14, 2005	1,225.31	1,226.50	Yes	-2.8%	-2.5%	+0.8%
Nov 18, 2005	1,245.04	1,248.27	No	+0.3%	+3.3%	+12.2%
Sep 25, 2006	1,325.76	1,326.37	No	+0.4%	+7.5%	+15.0%
Oct 12, 2009	1,071.66	1,076.19	Yes	-3.3%	+6.1%	+8.7%
Nov 4, 2010	1,217.28	1,221.06	Yes	-3.2%	+7.1%	+3.3%
Feb 24, 2012	1,363.61	1,365.74	Yes	-5.0%	-3.6%	+11.0%
Sep 6, 2012	1,419.04	1,432.12	No	-4.6%	-1.8%	+17.6%
Jan 4, 2013	1,465.77	1,466.47	Yes	-0.6%	+5.9%	+24.6%
Jul 8, 2016	2,128.28	2,129.90	No	-0.1%	+1.5%	+14.0%
Nov 21, 2016	2,190.15	2,198.18	No	0.0%	+7.0%	+18.2%
Aug 24, 2018	2,872.87	2,874.69	Yes	-8.1%	-6.4%	-0.2%
Apr 23, 2019	2,930.75	2,933.68	Yes	-6.4%	+2.1%	-4.6%
Oct 28, 2019	3,025.86	3,039.42	No	+0.4%	+8.4%	+11.6%
Aug 18, 2020	3,386.15	3,389.78	Yes	-4.4%	+5.4%	+29.8%
Jun 12, 2023	4,305.20	4,338.93	No	+0.5%	+2.6%	+24.9%
Dec 1, 2023	4,588.96	4,594.63	Yes	-0.9%	+10.9%	+31.7%
Jun 27, 2025	6,144.15	6,173.07	No	+0.9%	+7.8%	+21.5%

Source: Yahoo Finance ^GSPC daily closes, price only (no dividends), calculated October 15, 2026. "Worst close vs old high" is the lowest close in the 60 trading days after the breakout, compared with the old 52-week high. A positive figure means the index never closed back below the old high.

What the table says

Most breakouts wobble. In 16 of 28 cases (57%), the S&P 500 closed back below the old high within two weeks. Anyone who bought the breakout and used a tight stop just under the old high was stopped out more often than not. If you define a bull trap as "it went back below the level", the stock market sets one more often than it doesn't.

But most wobbles were shallow. Only 4 of the 28 breakouts saw a close 5% or more below the old high within three months: May 1996 (-5.3%), February 2012 (-5.0%), August 2018 (-8.1%) and April 2019 (-6.4%). The typical slip was 1% to 4%, the kind of retest that happens in a healthy market.

And the long-run record is strongly positive. 22 of 28 breakouts were higher 60 trading days later, and 25 of 28 were higher a year later, with an average one-year price return of +14.1%. Only three were lower after a year: November 1999 (-2.6%), the start of the dot-com top; August 2018 (-0.2%), which ran into the fourth-quarter 2018 sell-off; and April 2019 (-4.6%), which was hit by the trade-war drop in May 2019 and, a year on, by the COVID crash.

Holding above the old level was the better sign. The 12 breakouts that never closed back below the old high in the first ten days were all higher a year later, with an average gain of +19.6%. The 16 that slipped back were higher a year later in 13 cases, with an average of +9.9%. Slipping back did not mean the breakout was dead, but holding above it was a stronger start.

The honest conclusion for index investors is that a breakout to a new 52-week high in the S&P 500 has more often been the start of further gains than a trap. The famous "bull trap" in stocks tends to be a story told after one of the three bad cases, not the base rate. This lines up with what we found for another popular signal, the golden cross: in a market with a long upward drift, bullish-looking signals tend to look good because the index usually rises anyway.

Bitcoin: where bull traps really bite

We ran a similar test on Bitcoin, looking at each time it closed above its previous all-time closing high after at least 60 days without a new record. One caveat first: Yahoo Finance's BTC-USD daily history starts in September 2014, so the 2013 peak is missing. Records before late 2017 cannot be tested properly, so the table starts with the break above the December 2017 high.

Breakout date	Old record close	Breakout close	Worst close vs old record (90 days)	Return after 90 days
Nov 30, 2020	$19,497 (Dec 16, 2017)	$19,626	-7.4%	+130.0%
Oct 19, 2021	$63,503 (Apr 13, 2021)	$64,262	-34.6%	-34.3%
Mar 4, 2024	$67,567 (Nov 8, 2021)	$68,330	-13.8%	-0.8%
Nov 6, 2024	$73,084 (Mar 13, 2024)	$75,639	+3.9%	+29.4%
May 18, 2025	$106,146 (Jan 21, 2025)	$106,446	-4.9%	+10.4%

Source: Yahoo Finance BTC-USD daily closes (UTC), calculated October 15, 2026. Figures rounded to the nearest dollar.

Five breakouts is a small sample, and it would be wrong to draw a rule from it. But the range of outcomes is much wider than in the S&P 500. One breakout more than doubled in three months. One, in March 2024, went sideways and fell nearly 14% below the old record before working out later in the year. And one was a textbook bull trap.

The October 2021 bull trap

On October 19, 2021, Bitcoin closed at $64,262, above its April 2021 record close of $63,503. It was the week the first US bitcoin futures ETF started trading, and the breakout had a ready-made story. The price kept going for a few weeks, from $61,126 on November 5 to a record close of $67,567 on November 8. That was only about 5% above the breakout level, and it was the top. By November 12 it was back at $64,156. Within 90 days of the breakout, the price had closed 34.6% below the April high it had just cleared.

The trap kept closing. Bitcoin hit $19,018 on June 18, 2022, and $15,787 on November 21, 2022, a 76.6% fall from the November 2021 record close. Buyers who saw the October breakout as confirmation of a new leg higher waited more than two years, until March 2024, to get back to break-even.

What was different about that breakout? With hindsight, several warning signs from the checklist below were flashing: the new high was only marginally above the old one; the move came after a sharp, fast rally from the July 2021 lows rather than a long base; and the macro background was turning, with US inflation running hot and the Federal Reserve preparing to slow its bond buying and raise rates. Bitcoin's own seasonal tailwind, which we covered in our Uptober analysis, gave the move extra attention but did nothing to sustain it.

Where Bitcoin is now

Bitcoin's latest record close in the Yahoo data is $124,753 on October 6, 2025. On October 15, 2026 it was trading near $81,110, about 35% below that record. Whatever you think about the outlook, that is a reminder of how quickly a crypto breakout can turn: the last record close came just over a year ago.

A stock-market example: 2022, the trap that wasn't a breakout

People often call the S&P 500's summer 2022 rally a bull trap. The index rallied from 3,666.77 on June 16 to 4,305.20 on August 16, a gain of 17.4%, and then fell to a new bear-market low of 3,577.03 on October 12. But that rally never made a new high. The record close at the time was 4,796.56 on January 3, 2022. Strictly, summer 2022 was a bear-market rally, or dead cat bounce, not a bull trap.

There is a neat end to that story. The August 2022 high of 4,305.20 became the level the market had to clear. On June 12, 2023, the S&P 500 closed at 4,338.93, above it. That breakout appears in our table: it never closed back below the old high, and it was up 24.9% a year later. The same level that capped a bear-market rally became the launch point of a bull market. Levels matter; what happens when the price returns to them matters more.

How to tell a bull trap from a real breakout

No single test separates traps from real breakouts in advance. Traders combine several. None of these are guarantees; they are ways of tilting the odds and of deciding how much to risk.

1. The close, not the intraday spike

Many traps never get a daily close above the level. The price pokes through during the session, triggers stops and breakout orders, and closes back below. A close above resistance is the minimum. Some traders want two closes, or a close a set distance above the level, such as 1% for an index or a multiple of the average daily range for a stock or coin.

2. Volume and participation

A real breakout usually comes with rising volume that stays elevated for several days, not just a one-day burst. For an index, participation matters too: are most stocks rising, or is the new high being carried by a handful of large companies? Breadth measures such as the share of stocks above their 50-day average, or the advance-decline line making its own new high, help answer that. A new index high with a falling advance-decline line has been a classic warning sign.

3. The retest

Our data shows most S&P 500 breakouts come back to test the old high. What matters is how the retest behaves. In a healthy breakout, the old resistance acts as support: the price dips toward it, buyers step in, and the move resumes. In a trap, the price falls back through it and keeps going. Many traders deliberately wait for the retest rather than buying the first breakout, accepting that they will sometimes miss the move in exchange for avoiding more traps.

4. Momentum divergence

If the price makes a new high but momentum indicators such as RSI or MACD make a lower high, the move is losing steam. This "bearish divergence" was visible on many charts at the November 2021 Bitcoin top. Divergences can last a long time, so on their own they are weak timing tools, but combined with a weak retest they carry more weight. Our technical analysis tool shows these indicators for major markets.

5. Positioning and sentiment

Breakouts driven by short covering burn out faster than breakouts driven by new buying. Signs of a crowded, one-sided market include very low put/call ratios, extreme funding rates in crypto perpetual futures, and record inflows into leveraged products. Our guide to the put/call ratio explains how to read the options side. Options positioning can also create sharp moves that reverse when the positions expire, the mechanism we described in our gamma squeeze explainer.

6. Background conditions

Of the three S&P 500 breakouts that were lower a year later, two came with a clear change in background conditions: November 1999 near the peak of the dot-com valuation bubble, and August 2018 as the Fed kept raising rates. Bitcoin's October 2021 breakout came just before the Fed turned toward tightening. A breakout against a backdrop of rising rates, widening credit spreads or a weakening economy deserves more suspicion than one in an easing environment.

7. How far it is above the old high

The breakout margin in our S&P 500 table was often tiny: several breakouts cleared the old high by less than 0.1%. A breakout of a few hundredths of a percent has not proven much. The bigger and more decisive the move through resistance, the more likely it represents a real shift in supply and demand, though even big breakouts can fail.

What traders do about it

Because traps cannot be identified for certain in advance, the practical answer is risk management, not prediction.

• Decide the invalidation level before you buy. For a breakout trade, the natural line is a close back below the old high, or below the retest low. If that happens, the reason for the trade is gone.
• Allow for normal noise. In our S&P 500 sample, a stop placed exactly at the old high would have been hit in 16 of 28 cases, even though most of those breakouts worked. Stops placed a little further away, or based on daily volatility, survive more retests at the cost of larger losses when they are hit. A stop order can also fill well below its trigger price in a fast market.
• Size positions so a trap is survivable. If a failed breakout would cost more than you can comfortably lose, the position is too big, especially in crypto, where our table shows a 34.6% drop below the breakout level within three months.
• Scale in. Some traders buy a part of their position on the breakout and the rest only after a successful retest.
• Know your time frame. For a long-term index investor, our data suggests short-term breakout failures have mostly been noise. For a short-term trader with leverage, the same wobble can be a forced exit.

If you trade breakouts in indices or crypto, our indices signals and crypto signals publish entry, stop and target levels, so the invalidation point is defined before the trade. To practise these setups with real market prices, you can open a trading account and start on a demo before risking money.

Limits of this analysis

Our tests use closing prices only, so they miss intraday traps that never closed above the level. The S&P 500 figures are price returns without dividends, which slightly understates the one-year results. The 60-day gap rule and the 52-week window are choices; different rules would produce a somewhat different list, though we would expect the broad pattern of frequent shallow retests and mostly positive outcomes to hold in a market with a long upward drift. The Bitcoin sample is only five events, so treat it as a set of case studies rather than statistics. And past behaviour does not tell you how the next breakout will turn out.

The bottom line

A bull trap is a breakout that fails and traps the buyers who chased it. In the S&P 500 the fear of traps is bigger than the record: since 1991, most fresh breakouts to new 52-week highs dipped back below the old high, but few fell far and 25 of 28 were higher a year later. In Bitcoin, the October 2021 breakout shows how expensive a real trap can be. The useful questions are the same in both markets: did the price close above the level, did volume and breadth confirm it, did the retest hold, and what is the plan if it doesn't?

This article is for education and is not investment advice. Trading involves risk, and leveraged products can lose more than your initial deposit in some jurisdictions. Past performance is not a reliable indicator of future results.