Dead Cat Bounce
Definition of 'Dead Cat Bounce'A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce is a small, short-lived recovery in the price of a declining security, such as a stock. Frequently, downtrends are interrupted by brief periods of recovery - or small rallies - where prices temporarily rise. This can be a result of traders or investors closing out short positions or buying on the assumption that the security has reached a bottom. A dead cat bounce is a price pattern that is usually identified in hindsight. Analysts may attempt to predict that the recovery will be only temporary by using certain technical and fundamental analysis tools. |
|
Investopedia explains 'Dead Cat Bounce'A dead cat bounce is a price pattern used by technical analysts. It is considered a continuation pattern, where at first the bounce may appear to be a reversal of the prevailing trend, but is quickly followed by a continuation of the downward price move. It becomes a dead cat bounce (and not a reversal) after price drops below its prior low. Short-term traders may attempt to profit from the small rally, and traders and investors alike may try to use the temporary reversal as a good opportunity to initiate a short position. |
|
Related Definitions
Articles Of Interest
-
Dead Cat Bounce
Learn more about this macabre representation of a temporary price recovery. -
Using Open Interest To Find Bull/Bear Signals
Volume should inform your use of this indicator in confirming trends and reversals. -
Connecting Crashes, Corrections And Capitulation
Even though crashes, corrections and capitulations are bad news for investors holding the stock, there are still ways to profit. -
Digging Deeper Into Bull And Bear Markets
Discover why it's important to know the characteristics of the two types of market conditions. -
The Dead Cat Bounce: A Bear In Bull's Clothing?
Make sure you know the difference between a change in market outlook and short-term recovery. -
The Art Of Selling A Losing Position
Knowing whether to sell or to hold is tough. And no rule fits all. Find out what to consider. -
The Short And Distort: Stock Manipulation In A Bear Market
High-quality stock reports needn't be confused with stock manipulators' dramatic claims. -
A Primer On The MACD
Learn to trade in the direction of short-term momentum. -
War's Influence On Wall Street
Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common. -
When To Short A Stock
Learn how to make money off failing shares.
Free Annual Reports