Dead cat bounce is a
Wall StreetWall Street is a street in Lower Manhattan, New York City, New York, United States. It runs east from Broadway to South Street on the East River, through the historical center of the Financial District. It is the first permanent home of the New York Stock Exchange; over time Wall Street became the...
term that refers to a small, brief recovery in the price of a declining
stockIn the investment world, a share of stock represents a share of ownership in a corporation ....
.
The term, "dead cat bounce", is derived from the idea that "even a dead cat will bounce if it falls from a great height".
The phrase has been used on Wall Street for many years. The earliest use of the phrase dates from 1985 when the
SingaporeSingapore , officially the Republic of Singapore, is an island city-state located at the southern tip of the Malay Peninsula, lying north of the equator, south of the Malaysian state of Johor and north of Indonesia's Riau Islands. At , Singapore is a microstate and the smallest nation in Southeast...
an and
MalaysiaMalaysia is a country in Southeast Asia that consists of thirteen states and three Federal Territories, with a total landmass of . The capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. The population stands at over 28 million inhabitants...
n
stock marketA stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately....
s bounced back after a hard fall during the
recessionIn economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way...
of that year.
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Dead cat bounce is a
Wall StreetWall Street is a street in Lower Manhattan, New York City, New York, United States. It runs east from Broadway to South Street on the East River, through the historical center of the Financial District. It is the first permanent home of the New York Stock Exchange; over time Wall Street became the...
term that refers to a small, brief recovery in the price of a declining
stockIn the investment world, a share of stock represents a share of ownership in a corporation ....
.
History
The term, "dead cat bounce", is derived from the idea that "even a dead cat will bounce if it falls from a great height".
The phrase has been used on Wall Street for many years. The earliest use of the phrase dates from 1985 when the
SingaporeSingapore , officially the Republic of Singapore, is an island city-state located at the southern tip of the Malay Peninsula, lying north of the equator, south of the Malaysian state of Johor and north of Indonesia's Riau Islands. At , Singapore is a microstate and the smallest nation in Southeast...
an and
MalaysiaMalaysia is a country in Southeast Asia that consists of thirteen states and three Federal Territories, with a total landmass of . The capital city is Kuala Lumpur, while Putrajaya is the seat of the federal government. The population stands at over 28 million inhabitants...
n
stock marketA stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately....
s bounced back after a hard fall during the
recessionIn economics, a recession is a general slowdown in economic activity over a long period of time, or a business cycle contraction. During recessions, many macroeconomic indicators vary in a similar way...
of that year. Journalist Christopher Sherwell of the
Financial TimesThe Financial Times is a British international business newspaper. It is a morning daily newspaper published in London and is printed at 22 sites...
reported a stock broker as saying the market rise was a "dead cat bounce".
Variations and usage
A short rise in price followed by a price decline of a stock is the standard usage of the term. In other instances the term is used exclusively to refer to securities or stocks that are considered to be of low value. First, the securities have poor past performance. Second, there is no indication of an impending rise in price. Lastly, there is no indication that sustained growth is imminent should a major upward shift occur in the market.
Some variations on the definition of the term include:
- A stock in a severe decline has a sharp bounce off the lows.
- A small upward price movement in a bear market after which the market continues to fall.
Technical Analysis
A "dead cat bounce" price pattern may be considered part of the
technical analysisTechnical analysis is a security analysis discipline for forecasting the future direction of prices through the study of past market data, primarily price and volume.-History:...
method of stock trading. Price patterns such as the dead cat bounce are recognized only in hindsight. Technical analysis describes a dead count bounce as a continuation pattern that looks in the beginning like a reversal pattern. It begins with a downward move followed by a significant price retracement. The price fails to continue upward and instead falls again downwards, and exceeds the prior low.
Alternate meanings
The term has also been used in reference to political polling numbers.