As of 10/03/2023
  Indus: 33,002 -430.97 -1.3%  
  Trans: 14,682 -115.52 -0.8%  
  Utils: 789 +6.29 +0.8%  
  Nasdaq: 13,059 -248.30 -1.9%  
  S&P 500: 4,229 -58.94 -1.4%  
YTD
-0.4%  
 +9.6%  
-18.4%  
 +24.8%  
 +10.2%  
  Targets    Overview: 09/15/2023  
  Up arrow34,000 or 32,650 by 10/15/2023
  Up arrow15,500 or 14,200 by 10/15/2023
  Up arrow850 or 725 by 10/15/2023
  Up arrow13,750 or 12,700 by 10/15/2023
  Up arrow4,425 or 4,175 by 10/15/2023
As of 10/03/2023
  Indus: 33,002 -430.97 -1.3%  
  Trans: 14,682 -115.52 -0.8%  
  Utils: 789 +6.29 +0.8%  
  Nasdaq: 13,059 -248.30 -1.9%  
  S&P 500: 4,229 -58.94 -1.4%  
YTD
-0.4%  
 +9.6%  
-18.4%  
 +24.8%  
 +10.2%  
  Targets    Overview: 09/15/2023  
  Up arrow34,000 or 32,650 by 10/15/2023
  Up arrow15,500 or 14,200 by 10/15/2023
  Up arrow850 or 725 by 10/15/2023
  Up arrow13,750 or 12,700 by 10/15/2023
  Up arrow4,425 or 4,175 by 10/15/2023

Bulkowski on the Inverted Dead-Cat Bounce Chart Pattern

For more information on this pattern, read Encyclopedia of Chart Patterns Second EditionEncyclopedia of Chart Patterns 2nd Edition book., pictured on the right, pages 844 to 854. That chapter gives a complete review of the chart pattern, including tour, identification guidelines, focus on failures, performance statistics, trading tactics, and sample trade. Below is just a sliver of the information contained in the book.

The inverted dead-cat bounce is the name for this event pattern. Price makes a dramatic rise, from 5% to 20% or more, before declining at a more leisurely rate.

Identification Guidelines
Trading Tips
Example
Other Examples
See Also

 

Inverted dead cat bounce event pattern

Inverted Dead-Cat Bounce

Inverted Dead-Cat Bounce: Identification Guidelines

CharacteristicDiscussion
Price riseLook for an event that causes price to jump at least 5% but it can be 20%, 50%, or even higher. Avoid those stocks with takeover rumors as they tend to stay high or move even higher.
Higher highPrice typically moves higher the day following the event.
DeclineAfter that, price tends to decline.

Top of page More

Inverted Dead-Cat Bounce: Trading Tips

The following is based on tens of thousands of samples covering both a bull and bear market. Since it uses averages, your results will vary. Trade it appropriately for the situation. I have seen a number of cases in which price continues to climb after an event. Thus, a sale after the initial price rise might cause you to miss a substantial upward move. Trade this one carefully.

Trading TacticExplanation
MeasureMeasure the close-to-close price difference from the day before the event to the event day (the day price shoots upward). Then match the percentage rise with the one in the left column below.
5% riseSell the day after the initial rise. Buy back in during week 2 for a rise that lasts through week 4.
10% riseSell the day after the initial rise. Price trends lower thereafter.
15% riseSell the day after the initial rise. Price may bottom on day 3. Buy back in and hold until week 4 when price peaks.
20% riseSell the day after the initial rise. Buy back on days 3 or 11 and sell early in week 2 or week 4. Price trends downward at the end of week 4.

Top of page More

Inverted Dead-Cat Bounce: Example

Inverted dead-cat bounce event pattern example

The above figure shows an example of an inverted dead-cat bounce event pattern. Price soars by 28%, measured close to close. The company reaffirmed earnings projections for the year and said earnings would be at the high end of the range. A broker downgraded the stock but that did not prevent price from jumping up. Price made a new high a day later and then started a slide back down. Price reached a high of 15 before dropping to a low of 9.95, a decline of over 33%.

-- Thomas Bulkowski

Top of page More

Inverted Dead-Cat Bounce: Other Examples

See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com If you buy ANYTHING while there, they pay for the referral.
Legal notice for paid links: "As an Amazon Associate I earn from qualifying purchases."

My novels:  Remember Me book Bumper's Story book Head's Law book
My stock market books:  Chart Patterns: After the Buy Getting Started in Chart Patterns 2nd edition book Trading Basics book Fundamental Analysis and Position Trading book Swing and Day Trading book Encyclopedia of Chart Patterns 3rd Edition book

Copyright © 2005-2023 by Thomas N. Bulkowski. All rights reserved.
Disclaimer: You alone are responsible for your investment decisions. See Privacy/Disclaimer for more information.
Some pattern names are registered trademarks of their respective owners.
Home Advertise Contact Donate Privacy/Disclaimer

Disinformation is not as good as datinformation.Smiley