Talk:Dead cat bounce

From Wikipedia, the free encyclopedia
Jump to: navigation, search
WikiProject Finance (Rated Start-class, Mid-importance)
WikiProject icon This article is within the scope of WikiProject Finance, a collaborative effort to improve the coverage of articles related to Finance on Wikipedia. If you would like to participate, please visit the project page, where you can join the discussion and see a list of open tasks.
Start-Class article Start  This article has been rated as Start-Class on the project's quality scale.
 Mid  This article has been rated as Mid-importance on the project's importance scale.
 

why[edit]

I think if someone spent enough time analyzing what goes on in the order book (bids/asks - or what market makers/traders are willing to buy and sell for), they might find the "DCB" to simply be traders closing positions/taking profits (possibly in order to re-enter at more favorable price). The reason why in historical data there appears to be repeating patterns is that in order to beat the costs of active trading, the trade must have a good probability of going atleast far enough. Similarly when no one is buying or selling, the traders may just be waiting for price to reach a point where it looks "cheap enough" with respect to recent volalitity. This waiting for the right price that's based on recent activity creates these historically apparent "levels". It's really no different than when people flock to the brick and mortar store to buy some 50%-off gadget - these levels tend to often occur at some percentage of previous highs and lows. Of course if everyone on buy side bought at 50% off, market makers (sell side) would be 100% short and instead of going higher, the price would go to zero and stay there until the buy side decided to take a loss. This is extreme example - usually as the price goes lower it hits some older "cheap" levels and more buyers come in and traders take their loss dictated by their systems, so only in penny stocks price can really plummet to zero in this type of scenario.

Following isn't really about DCB but may apply if after at Dead cat bounce price just doesn't go anywhere - which suggests no one is interested and there's no open interest - a situation where retail buying could result in a (usually short-term) down trend and selling in up trend (ending in "short-squeeze"). (all traders went away, so now its the market maker/big bank in control of the prices)

The more chaotic/less predictable a chart is, similarly reflects the conditions in the order book over time. If most of the stock/merchandise being offered is in few hands (usually one or two companies in stocks), the easier these hands can wave the price around - there does not need to be any buying or selling and the price can go from $10 to $1 in a second or other way around, simply because the market makers (few hands) decided so. This is best seen in penny stocks and illiquid assets. eg. Someone sold a worthless penny stock short at $0.1 hoping it goes to $0, but since the market maker is controlling the stock, it will now re-price at higher, causing the sellers to buy high after selling short. But since it's a penny stock, they cannot buy it at all if the market maker didn't sell it to anyone else and could lose unlimited amount of money just by having sold one stock short. This is why traders also have rules about not trading things that are illiquid. (those trading illiquid things are essentially sell side/market makers. There's a reason why the buy side is being secretive about what works - it's because it's been proven that once what works becomes public it stops working, because of what I explained above - if everyone is "long" then quickly someone will notice this and cause the possible "all time high" by being the first to sell).

From what I've read, professional traders could make money just by randomly entering long or short - over many trades, they'd still atleast come out break-even, because they have many rules based on which to exit the trade. I just covered one such rule above: If traders liquidate/lose interest, you better do so too. Of course this happens all the time, so for a long term trade with active risk management in place, it would only be applicable if the chart patterns become irregular or "choppy" at a relevant higher timeframe, to avoid closing the trade just because traders went to lunch. Chop is a trading term meaning price movement that "chops out" the novices that are still holding when professionals lost interest long ago.

Untitled[edit]

I'm removing the SCO reference for now, too subjective ... too soon to know what's is causing the rise.... Pete/Pcb21 (talk) 09:29, 23 Apr 2004 (UTC)

The phrase origin may also reflect prejudice against cats (compared to dogs etc.) —Preceding unsigned comment added by 63.193.144.79 (talk) 15:53, 27 May 2008 (UTC)

I like this phrase and added links to this page from a number of other stock market pages. RussAbbott (talk) 15:29, 12 June 2008 (UTC)

Symbols[edit]

This addition "A→A (symbolically) that future expectations are resultant from and caused by past confirmations." on 16 Sep seems (a) confusing and (b) adds no value. You don't need a symbolic expression to clarify the statement. Also, this and the next paragraph don't add anything substantial to the article. May even be speculative. Delete? Opinions? Joe (talk) 13:11, 19 September 2008 (UTC)

Passage deleted by author Sentriclecub as discussed here. Joe (talk) 08:00, 20 September 2008 (UTC)

NASDAQ example[edit]

My edit to illustrate that the moderate rise on NASDAQ on 10 October 2008 *may* be a dead cat bounce, directly after the notation that the true nature of such bounces is only clear in hindsight, is an illustrative example of exactly that, not personal analysis or commentary. (Note the contrast to "*is* a dead cat bounce".) Thus it does not violate NPOV ... although your deletion may. Please provide proof otherwise or restore my edit, Piano non troppo. - Tenebris

I have allowed nearly a week for a reply. Lacking such, I am restoring the text. - Tenebris
We don't deal in what *may* happen. Please read WP:AWW. Relaxing (talk) 20:22, 15 October 2008 (UTC)
Read the text again. It has nothing whatsoever to do with what may happen as a future imperfect, nor with speculation. It deals only with an appropriate classification of what is, one which exactly meets the definition parameters set out by this very article. To delete such an example suggests a failure of WP:NPOV, in refusing to acknowledge that a current example fits objectively within a cited and accepted definition. But since you choose to limit yourself to AWW, two links beyond the one you chose to cite you will have noticed that there are appropriate uses for "may", even on Wikipedia. - Tenebris
Your example only works because it is still a current event. In a few months we will have the benefit of hindsight, and we will know whether or not the rise in question was a dead cat bounce. Then your example will no longer be relevant. Do you see now why it is not a good addition to the article? Relaxing (talk) 18:56, 16 October 2008 (UTC)

Cantonese[edit]

Just a note here, the source of this phrase is a translation from Cantonese, where it is an older expression. - a novice —Preceding unsigned comment added by 219.77.60.67 (talk) 12:42, 25 June 2010 (UTC)

Humour[edit]

I think it should be mentioned that the original expression is of humorous intention. People from many different cultures and language origins read wikipedia, and this kind of humour is not universal. 90.3.35.64 (talk) 09:47, 10 March 2012 (UTC)

hindsight?[edit]

IMO, DCB can be (although this is often difficult and risky) recognized beforehand - being able to distinguish general market direction from a short reversal impulse is IMVHO the main point of being accustomed with the market at hand...

Poponuro (talk) 21:26, 9 December 2013 (UTC)

Agreed. It's a very silly statement. Every chart pattern is only seen in "hindsight", since obviously we can't chart price action that hasn't occurred yet... But many traders including myself attempt to ANTICIPATE chart patterns like bounces right after sudden price drops. The "hindsight" sentence really serves no function other than confusing learners. — Preceding unsigned comment added by 162.72.17.161 (talk) 01:36, 1 February 2014 (UTC)
statement rephrased. Poponuro (talk) 12:15, 2 April 2014 (UTC)