A dead cat bounce in investing is a "dumb bounce." It can entice investors to put money into struggling companies. So what does dead cat bounce mean and what cause dead cat bounce. Let’s find out by reading the article below.
What does dead cat bounce mean?
A "dead cat bounce" is market jargon for a security (read stock) or index that experiences a brief burst of upward movement during a sharp downtrend. It is a temporary rebound in the price of a security or index following a major correction or downtrend.
What cause dead cat bounce?
Reasons for a dead cat bounce include liquidating short positions, investors mistakenly believing that a bottom has been reached, or investors trying to find oversold assets. Ultimately, dead cat rallies are not based on fundamentals, so the market quickly continues to fall.
Opposite of dead cat bounce
During a secular bull market, an inverted dead cat rally is a temporary and often severe sell-off. It has many of the characteristics of a dead cat bounce, but just the opposite.
I hope this article will help you to learn what does dead cat bounce mean and what cause dead cat bounce. Dead cat bounces usually only last a few days, but sometimes last for months.
