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Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Chart Patterns: After the Buy
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Bulkowski's Dead-Cat Bounce

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Candles Chart
Small Patterns
Industrials (^DJI):
Transports (^DJT):
Utilities (^DJU):
Nasdaq (^IXIC):
S&P500 (^GSPC):
As of 04/20/2018
24,463 -201.95 -0.8%
10,579 -92.91 -0.9%
691 -5.96 -0.9%
7,146 -91.93 -1.3%
2,670 -22.99 -0.9%
Tom's Targets    Overview: 04/13/2018
25,300 or 23,400 by 05/01/2018
10,800 or 9,800 by 05/01/2018
670 or 710 by 05/01/2018
7,400 or 6,800 by 05/01/2018
2,750 or 2,600 by 05/01/2018

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 829 to 843. That chapter gives a complete review of the chart pattern, compared to what is described below.

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The numbers cited in this article are based on hundreds of perfect trades. See the glossary for definitions.

The dead-cat bounce is the name of this event pattern. Price makes a dramatic drop, averaging 30%, before bouncing only to resume the decline at a more leisurely rate.

Which industries are more likely to have stocks that dead-cat bounce? For the answer, click here.

Identification Guidelines for Dead-Cat Bounces

An example of a dead cat bounce event pattern Picture of a dead cat bounce

Reference the above figure in the following table.

Price gapPrice usually gaps downward, closing 15% to 70% lower than the prior day. The average event decline from prior close to trend low is 31%.
Trend lowForty-six percent make a lower low the next day, 17% continue lower the next day, then 9%, and then 3%, respectively. From the event day to the trend low averages 7 days.
BounceAfter the event day decline, price bounces. Twenty-two percent will close the gap during the bounce phase, 38% will close it in 3 months, and 58% will close the gap in 6 months. The average bounce height from event low to bounce high is 28% and takes 23 days.
Post bounce declineOnce the bounce completes, price resumes declining, averaging 30% from the bounce high to post bounce low in 49 days. This places price an average of 18% below the event low 67% of the time.
Second dead-cat bounceTwenty-six percent will have a second dead-cat bounce measuring at least 15% within 3 months, and 38% will dead-cat bounce within 6 months.
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Dead-Cat Bounce Trading Tips

I released a trading setup based on new research using a dead-cat bounce that may interest you.

Trading TacticExplanation
BounceThe larger the event day decline, the larger the bounce and the longer it takes for price to reach the bounce high.
SellIf you own the stock, wait for the bounce to peak and then sell.
SwingersSwing traders can buy near the event trend low and ride price upward until it peaks in the bounce phase. Only try this if the event day decline is a large one, say over 30%. Event losses (from the close the day before the event to the trend low) above the median 28% decline had bounces averaging 35% in 25 days. Those below the median bounced 22% and took 20 days.
ShortFor experienced traders, short the stock at the top of the bounce and ride price lower. Expect price to drop to at least the event trend low.

Example Dead-Cat Bounce

A dead-cat bounce event pattern example

The above figure shows an example of a dead-cat bounce.

On July 5, 2001, a broker issued a report that said would beat the consensus estimate for earnings. It didn't. When announced earnings results on July 23, they were below expectations. Price gapped open and closed 25% lower. The next day, price made a lower low and then started a recovery. It bounced upward for about a week and then turned down. When price finally began a recovery, it had bottom 66% below the close the day before the earnings announcement.

-- Thomas Bulkowski

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Other Examples of Dead-Cat Bounces

See Also

Written by and copyright © 2005-2018 by Thomas N. Bulkowski. All rights reserved. Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information. Never use a big word where a diminutive one will suffice.