Real World  |  SEP 1999

The Dead Cat Bounce by Thomas Bulkowski

The Dead Cat Bounce If you trade stocks long enough, you might have an event take your stock down 25% to 70% in a single session. Then the situation gets grim. Here’s a review of the dead cat bounce chart pattern and a strategy to minimize any additional losses. Warren was a novice investor who’d never suffered some of the ups and downs of a volatile market. He called me shortly after the market closed one day, and he was so excited, it took me a moment to recognize his voice: “Oxford just went from 69 to 26. That’s a decline of 62%! I’m thinking of buying because after such a large drop it’s just got to bounce.” He wanted to buy into the situation that can be seen in Figure 1. My reply? “If you don’t get out within a week, you’ll lose money,” I told him.

by Thomas Bulkowski