The Dead Cat Bounce – What It Means In Trading
There’s a saying in Wall Street which is called a dead cat bounce. Now, what is a dead cat bounce?
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So, here’s an example with the S&P 500, we can see the S&P 500 fell from around just above 3400 handle falling to hit the 2900 handle before there was dead cat bounce up to 3100.
So, any sort of short-term bounce after any asset has fallen from a high height is refer to as a dead cat bounce. And, of course, you don’t want to be buying into a dead cat bounce, thinking it’s a recovery because, after all, it’s only because the asset has fallen from a very high height, hence, even dead cats will bounce if they’re dropped from a high enough height.
So, the next time you hear the saying, a dead cat bounce, you’ll know exactly what is being referred to.