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Finance & equities

Stock bounce

Dead cat bounce: what is it & how to spot a dead cat bounce

A dead cat bounce, also known as a “cat bounce,” is a brief recovery in the price of a stock or other security following a sharp decline. This type of recovery is typically short-lived, and is often followed by an even larger drop in price. The name of this phenomenon comes from a common belief that even dead cats will bounce once they land on the ground after falling – though this idea has been shown to be false in numerous scientific experiments. Overall, the term “dead cat bounce” is used to describe any transient uptick in the price of an asset following a steep decline.

Trend chart

Buying the dip: Does buying the dip work – should you buy the dip?

For many investors, the phrase “buy the dip” is more than just a motto – it’s a way of life. Put simply, buying the dip refers to the practice of buying assets when they are experiencing a short-term drop in price. The logic behind this strategy is that prices will eventually rebound, at which point the investor can sell the asset for a profit.