Dead cat bounce meaning is used to describe a brief recovery in the price of a declining asset that is shortly followed by a continuation of the downtrend.
Even a dead cat will bounce if it falls from a great height. The bounce signifies a brief recovery of sorts, but it does not change the fact that the cat is dead. In crypto terms, this may describe a cryptocurrency that is experiencing a small comeback in the midst of a plummet.
During the initial stages of a Dead Cat Bounce pattern, where the prices may seem to be on the uptrend, it might be confused with a general trend reversal. However, after some time, the price refuses to go up, and the downward trend continues, breaking previous support levels and creating new lows. As such, Dead Cat Bounce patterns may also result in what is called a bull trap, where investors open long positions hoping for a trend reversal that does not happen.
In conclusion, dead cat bounce meaning is the period of brief recovery in the price of a declining asset, and this is then followed by a continuation of the downtrend.
