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A dead cat bounce or a dead cat bounce is a temporary rebellion that occurs in the middle of the fall market.
Even if you see a strong rise, there is a case where the fall trend actually continues.
In this article, we will explain the meaning of dead cat bounce, why it occurs, the difference from full-fledged reversal, the actions that beginners want to avoid.
What is dead cat bounce?
A dead cat bounce is a market term that refers to a temporary rebellion that occurs after a large fall.
It is called Dead Cat Bounce in English.
Although the stock price rises temporarily in the middle of the fall trend, it is used in the scene that falls twice.
It’s important that it’s not limited to being recovered full-fledged because it’s offensive.
What happens in the scene?
A dead cat bounce often happens after a sudden drop.
| Contact | 内容 |
|---|---|
| Emergency | Panic sales |
| Oversold | Short-term purchase |
| T rise | The bottom expectations |
| Cancel | Downward trend continues |
Beginners are easy to misunderstand this temporary rebellion as "Start Recovery".
Why するする
1. Buyback
Empty sale is a trading aiming for profit in stock price drop.
If the stock price falls greatly, the investor who sold the stock will buy back for the final profit.
This purchase may make a short-term rebound.
2. Autonomous rebellion due to oversold
If the stock price is too low in a short time, short-term purchase will be easier.
For example:
- Shopping
- Back
- Buy short-term trades
- Short Cover
However, if the root cause of the fall is not solved, it may not last long.
Difference from full-fledged reversal
This is the most important point.
T recession and full-fledged reversal are separate.
| 項目 | dead cat bounce | Reversal |
|---|---|---|
| 性質 | 一時反発 | Trend Conversion |
| 出来高 | weak | Easy to increase |
| High | Not updated | High-value updates |
| Price | Easy to interrupt again | Cut down low |
| Background | Buyback and short-term発 | Business performance improvement and environmental improvement |
It is not possible to judge that it is a full-fledged reversal only once raised.
Beginners tend to fail
If you see a sudden 発, you may think like this:
- may be bottomed
- I don't want to ride late
- Buy Now
- Back to previous high
However, in fact, there are cases where you can fall further, form the second bottom, or slump for a long time.
It is important to check whether the downward reason has been resolved before flying on a sudden 反.
Point of view
1. See the production volume
It is important to be able to perform at the time of relapse.
| State | 見方 |
|---|---|
| Low volume | Possibility of weak rebound |
| More | Possibility of full-fledged |
| No growth after a rapid increase | Possible to sell pressure |
You may end up with short-term purchase.
2. Is it possible to update high value?
After short-term repetition, check whether the previous high value can be exceeded.
In addition, it is important to have a low price.
T recurrence only: High value can not be updated again
Full-scale reversal: Low-value-cutting, high-value renewal continues3. Is the cause of dropping solved?
What is the most important thing?
For example, if the following factors have not been improved, there is a possibility that the reaction will not continue.
- Deterioration
- Interest rate rise
- Home
- Aggravation
- Funding Concerns
- End of the theme market
Check the stock price as well as the background.
Tips for Practice
It is important not to jump right away to avoid dead cat bounce.
For beginners, please check the following.
- Is it possible to explain the reason for rebellion?
- Is the production capacity increased?
- Is it possible to update high value?
- Improve the cause of fall
- Are you deciding the cutting line?
In particular, it is important to reduce the position size because the value movement is easy to get rough.
The dead cat bounce is a temporary rebellion that occurs in the middle of the fall market.
the full-fledged reversal, it may be re-de ed.
Note that beginners do not jump around only sudden 発.
There are three points to check:
- 出来高
- High value update
- Improvement of the cause of fall
In investment, it is important not only to see whether it was raised, but also to see why it was raised.