Dead cat bounce

[1] Derived from the idea that "even a dead cat will bounce if it falls from a great height",[2] the phrase is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline.

[3] The earliest citation of the phrase in the news media dates to December 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year.

Journalists Chris Sherwell and Wong Sulong of the London-based Financial Times were quoted as saying the market rise was "what we call a dead cat bounce".

In the San Jose Mercury News, Raymond F. DeVoe Jr. proposed that "Beware the Dead Cat Bounce" be printed on bumper stickers and followed up with a graphic explanation.

"The phrase is also used in political circles for a candidate or policy that shows a small positive bounce in approval after a hard and fast decline.

Some variations on the definition of the term include: A "dead cat bounce" price pattern may be used as a part of the technical analysis method of stock trading.

Technical analysis describes a dead cat bounce as a continuation pattern in which a reversal of the current decline occurs followed by a significant price recovery.

A dead cat bounce might prey on some of the following investor biases:[15] Anchoring occurs from relying too much on a fixed reference point rather than adjusting expectations based on updated information.

The dead cat bounce is a prime example of a rebound fuelled by traders and speculators who bet on their optimistic views rather than the intrinsic or actual value of the stock.

To counteract these biases, implement a disciplined and evidence-based approach to investing, look at a longer time frame, or diversify in an index fund.

By understanding the psychological traps that can lead to a dead cat bounce, investors can make achieving their financial goals more likely and avoid costly errors.