Can a dead cat bounce? Technical Analysis explained

Dead Cat Bounce is the name of a phenomenon in Technical Analysis

When I was learning to trade forex in the beginning, my trainer mentioned ‘dead cat bounce’ during class one day. It was the first time I heard such a term. I thought that it was invented by the her because it sounds so weird.

After class, I googled the Internet and Voila! There really was a chart pattern named Dead Cat Bounce after all! OMG, it was real!!

 

What is a Dead Cat Bounce?

So what exactly is this oddly named pattern and what are its implication and uses?

A Dead Cat Bounce is a trend continuation pattern and basically means a reversal chart pattern has failed, usually the ‘Head & Shoulders pattern (amazingly another wonderfully named phenomenon that traders are familiar with).

Binni wrote an article on this last year ‘Dead Cat Bounce – Chart Pattern with an Elliott Wave Twist‘.

Now, a dead cat bounce in forex means a failed head and shoulders pattern. Once a dead cat bounce happens, buyers can quickly join in whereas sellers will have to close their shorts. It is easy to recognise and is a chart pattern that has a high probability outcome.

Picture of dead cat bounce

Dead cat bounce describes price rallying and making a ‘Head and Shoulders’ pattern invalid

 

Come and learn many other chart patterns

Come and join us in the TerraSeeds Forex Tflow® currency trading course. Besides many sophisticated concepts like Elliott Waves and Fibonacci Ratios, you can have fun learning to trade forex when we teach you to recognise many trading patterns with amazing names like wash and rinse, 1-2-3-4, WRMB and WTT.

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Jerome Lee

Last time, many things that I wanted were just dreams, now I see them as possibilities. I'm looking forward to own pent-house suite in Manhattan overlooking Central Park because forex trading with Tflow® makes it possible. Find me on Google+

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