All language subtitles for 6. Dead Cat Bounce Chart Pattern

Arguably, one of the funnest names in patterns is the dead cat bounce, and traders love dead cat bounces.

It's the continuation pattern, so it's going to continue whichever way the trend has been.

Had it before.

And they love it not just because it seems kind of funny, but it's actually a very good trading indicator,

as we'll see here coming up.

And they're very rare actually.

When you see a dead cat bounce, sometimes you'll see forms or people who are talking about trading

say, oh, my gosh, it's a dead cat bounce.

And, you know, it seems like it's forming Warchild.

It looks like a dead cat bounce.

So you'll see you'll see some of that out there.

But because it's rare, but the reason that traders love it or like it is, it's very consistent.

It's one of the more proven patterns out there is very consistent pattern.

And it includes a gap as part of the overall pattern.

There's a gap in prices.

And you'll see when we walk through how this works.

And a gap, by its nature is a very strong indicator as well.

So you have an indicator that is part of the indicator, has a strong indicator built kind of right

into it.

So that's helps to make it very, very consistent is the idea of a dead cat bounce.

So let's look at a dead cat bounce and how that kind of works, because it's a pattern they'll take

a little bit of time to form because certain conditions have to be met along the way.

So what happens is you see this and we're going from left to right, of course, with our time farther

back in time to more to the right, more recent times.

And prices are high at the top, low to the bottom.

So what we're seeing here, you can obviously see that there's a downtrend, right?

Remember when whatever train chart patterns, there has to be an established trend.

So what we're seeing here, and this is what they care about, there's a downside breakaway gap.

So you can see the three bars, the left, the three price ranges.

Imagine before that there was an established trend to and then all of a sudden there's a down downside

gap.

Right.

There's a big gap in prices.

The lows of the previous day were well broken and went to even lower lows.

And we have a gap in prices there.

Review or take a look at the lessons around gaps in training gaps.

We'll learn more about gaps.

But the whole idea is there's the something's happened.

There's some type of big bad news or something happened to cause a big drop in prices.

And the typically for cap copilots, you want to see a dramatic drop.

It's not a small two, three, four percent breakaway gap or big drop drop.

You were looking for something like 25 percent or even up to 70 percent drop.

You're looking for some really bad things to happen.

Your cat is dead, unfortunately.

And so you have this big gaps.

Look for a big gap of like a twenty five to seven percent price drop and then it basically forms this.

It goes in this now new even steeper downtrend and then it reaches a bottom of the downtrend and hits

the floor.

Your dad hits the floor and it bounces.

So you see there's another breakaway cap off the bottom where it bounces up.

Right.

The prices have now made a leap up and it doesn't have to be a dramatic leap up.

Just that there's a gap this form.

The idea is that it's gone.

They've had a downside gap.

Things have gotten even worse.

It keeps going down, down, down.

It looks terrible.

And then it bounces off the bottom and then it starts going up.

And so it's a short idea of the formation of the because as a short term thing, it doesn't reach the

original price gap prices.

It doesn't see how when it reaches its peak, it doesn't go above the prices or above where that original

crappers gap was.

Back to the original, let's see, three downward lines there on the far left.

It's going to kind of start to approach that, but then it's going to turn around again.

Again, a dead cat bounce is a continuation pattern, so it's going to resume that strong downtrend.

But the idea and the idea is something bad happened.

Drive it down.

And people are looking at it as a hit rock bottom and bounces.

They're saying this is way too low.

Maybe this has been oversold.

Let me buy one and then you get more buyers.

That has the bounce.

That's your breakaway gap.

That's the bounce side.

Yes.

You want to trade on the bounce, but be ready to get out, right.

So you you're seeing this happen.

It bounces up.

You see some you see a breakaway gap.

You need a breakaway gap going upwards, not just a trend going upwards.

You need a breakaway gap going up to be a dead cat bounce.

You trade on that short term trade, but you're ready to get out, especially as it starts approaching

that that first breakaway gap to the downside or approaches the last kind of low in the previous downtrend

low.

You want to get out and take your profits because what's going to happen with a dead cat bounce?

This is going to reverse or basically this temporary bounce, this temporary reversal is going to go

back to the original drawn trap.

So be ready to get back out.

You can have the exact opposite of that, which is and that's even rarer than a decompiled, which is

an inverted dead cat bounce.

Just imagine this, but you're in an uptrend and they're all the same concept.

Supply is just in an uptrend is what would be happening again, very, very rare.

But if you see that, you can kind of trade a property around that.

So the idea of the TED cat bounce is it's a short term kind of profit opportunity, and that's why a

lot of traders like it.

Besides, the funny name is they can get in and get in and get some profits, but they're really watching

closely for any sign of a turn that might be turning back down to that downtrend.

And then they get out right away with a dead cat bounce.

You want to trade on the bounce as it bounces off the floor.

You don't want to go back into that downtrend because the downtrend is going to keep getting worse.

It's going to go past that floor and start creating new floors on this bad downtrend.

So dead cat bounce is our our good training opportunities, but just be aware of how to trade them.

That's the real key part, is that you're trading the day get pounds.

It's not something you'd hold for a long period of time.

You're just trying to trade on that bounce.

Get in, get out.

Make some profit.