GlossaryBeginner
Dead Cat Bounce
A short-lived price recovery during an ongoing downtrend, which fails to reverse the trend and is followed by renewed decline.
A dead cat bounce is a short-lived price recovery that occurs during an ongoing downtrend, which fails to actually reverse the broader trend and is followed by renewed price decline — the name reflects the dark, informal market saying that "even a dead cat will bounce if it falls far enough."
A dead cat bounce can only be confidently identified in hindsight, after the subsequent decline has actually occurred — at the time a recovery is happening, there's generally no reliable way to distinguish a genuine trend reversal from a temporary bounce within an ongoing downtrend.
Examples
- A sharp recovery during a downtrend that's later followed by a renewed decline to new lows is, in hindsight, commonly labeled a dead cat bounce.
- A dead cat bounce can only be confidently identified after the fact — there's no reliable way to distinguish it from a genuine reversal while it's actually happening.