Hey everyone. This is Kirk here again from Option Alpha and in this video update, I want to walk through exactly what a dead cat bounce is or what it means, essentially. And when you get started in trading, you might hear this crazy terminology and a lot of people use this and we use it often here too and it’s just a phrase used to describe a situation that happens in the market. And so, I want to walk through what that is, so you understand it if you’ve come across it or you don’t know what we’re talking about or you think we’re crazy that we’re talking about dead cats flying and bouncing out of windows and off of buildings. But essentially, what happens is you get a stock that goes into a little bit of a downtrend and it can happen in multiple ways and there’s no total definition that says this is exactly what it is and it’s got to happen by this factor. But you get a stock that starts to decline and it starts to move down, potentially maybe sharply moving down and what will inevitably happen in most securities is that during this decline, whether it’s sharp or it’s a decline that it’s been in for quite some time, is you get a little bit of a relief rally in the security. It could be very short-lived. It could be a pretty strong bounce or rally off of some low and this in and of itself, this part right here is essentially the dead cat bounce and the idea behind it is that even if you throw a dead cat out the window or off of a building, even a dead cat will bounce when it hits the pavement and come back up at some point. And so, what most people look at is they look for a stock that has had a big decline or a significant decline to see that little bit of a dead cat bounce and then for the stock actually to continue moving down or to continue selling off. It’s typically not something that happens at the bottom of a market move or at least people don’t describe it that way, but that really is the dead cat bounce. It’s just this little in between period where we have a little bit of a relief rally in the security before the security continues potentially to move lower. Hopefully this helps describe what it is. As always, if you guys have any questions or comments, let me know and until next time, happy trading.
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