Dead Cat Bounce Chart Pattern — How to Spot and Trade It

A sharp collapse, a reflex bounce, then continuation lower.

In plain words

Even a dropped cat toy bounces once — it still ends up on the floor.

What the classic books say

The Dead Cat Bounce is a continuation pattern with reference reliability Medium and illustrative behaviour of ~70% resume lower (the kind of statistics catalogued in Bulkowski's encyclopedic pattern studies and Murphy's technical-analysis classic). Named for false hope after bad-news gaps.

Level by level

Beginner

After a crash, a small bounce fools hopeful buyers — then the slide resumes.

Intermediate

Reflex bounces retrace ~30-50% of the crash leg before failing.

Advanced

The bounce's failure below the crash's origin confirms continuation.

Trade plan (educational template)

• Entry: On the bounce's failure (lower high + break of bounce support).
• Stop-loss: Above the bounce high.
• Target: Retest of the crash low, often lower.
• Check the numbers with the Risk-Reward calculator before any entry.

Common beginner mistakes

• Mistaking the bounce for the bottom

Practise it now

• ▶ Draw the Dead Cat Bounce with live trendlines and a ghost forecast
• 📖 Full lesson in the Learning Hub

_Educational content only — not financial advice. Historical behaviour never guarantees future results._