Tuesday, June 9, 2015

Term of the Day: Dead Cat Bounce

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June 9, 2015
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:

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...

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