• Free Book
  • Store
    • Books
    • Free First Chapters
    • Free Newsletters
  • Recent Articles

TradingMarkets.com

Quantified Stock Market Trading Strategies & Systems

  • Home
  • New Trading Research
  • Education
    • Articles
      • Connors Research
      • ETFs
      • Options
      • Stocks
      • Volatility
    • Trading Lessons
    • Connors Research
    • Glossary
    • Interview Archive
    • Videos
  • Python
  • Quantamentals
    • Quantamentals: The Next Great Forefront of Trading and Investing
    • Quantamentals Resources
  • Courses
  • Store
    • New Book! The Alpha Formula
    • “Buy The Fear, Sell The Greed” – Best Seller!
    • Swing Trading College 2019
    • Trading Books and Guidebooks
    • Street Smarts
    • Online Trading Courses
    • Private Mentoring with Larry Connors
    • Customized Trading Research
    • Amibroker Strategy Add On Modules
You are here: Home / Recent / How I Trade Dead Cat Bounces, Part 2

How I Trade Dead Cat Bounces, Part 2

October 21, 2008 by John Jagerson

In part 1 of our technical price pattern analysis, John Jagerson discussed how relatively easy it is to identify The “Dead Cat Bounce”. To read part 1 of “How I Trade Dead Cat Bounces”, click here.

Identifying a dead cat bounce is just part of the challenge. Estimating or forecasting the likely distance the stock will move following the pattern is also important. There is a reasonably easy way to start making these estimates following the bounce back down from resistance.

To do this we will be using fibonacci retracements, which are one of the primary tools used by technicians to identify support and resistance levels and to make price projections.

The image below illustrates how this analysis is conducted. A fibonacci retracement is drawn from the first bottom following the gap (point A) to the break from resistance at the top of bottom of the gap (point B). The retracement lines themselves can be ignored because what you are interested is past the first low at the 161.8% projection level (point C).

As you can see in the case study below this price was easily reached. Of course, ongoing trade management continues to be important but this analysis provides a solid starting point for evaluating the opportunity.

Merck (MRK) Daily Chart

John Jagerson is the author of many investing books and is a co-founder of LearningMarkets.com and ProfitingWithForex.com. His articles are regularly featured on online investing publications across the web.

Filed Under: Recent, Trading Lessons Tagged With: dead cat bounces, fibonacci analysis, John Jagerson

Buy The Fear, Sell The Greed

Buy The Fear, Sell The Greed

Swing Trading College

New Book From Larry Connors and Chris Cain, CMT – "The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk"

We’re excited to announce the release of a new investment book written by Larry Connors and Chris Cain, CMT. The book, “The Alpha Formula; High Powered Strategies to Beat The Market With Less Risk “ combines… Hedge fund legend Ray Dalio’s brilliant insight into combining uncorrelated strategies… With new, minimally correlated, quantified, systematic strategies to trade… [Read More]

Buy The Alpha Formula Now

Connors Research Traders Journal (Volume 57): 7 Real-World Reasons Why Short Strategies Should Be Included In Your Portfolio

In our new book, The Alpha Formula – High Powered Strategies to Beat the Market with Less Risk, we show the benefits of including short-strategies in your portfolio. As a reminder, building portfolios should be based on First Principles – otherwise known as truths. These truths are: Markets Go Up Market Go Down Markets Go… [Read More]

Company Info

The Connors Group, Inc.
185 Hudson St., Suite 2500
Jersey City, NJ 07311
www.cg3.com

About Us

About
Careers
Contact Us
Link To Us

Company Resources

Help
Privacy Policy
Return Policy
Terms & Conditions

Properties

TradingMarkets
Connors Research

Connect with TradingMarkets

Contact

info@cg3.com
973-494-7311 ext. 628

Free Book

Short Term Trading Strategies That Work

© Copyright 2020 The Connors Group, Inc.

Copyright © 2023 · News Pro Theme on Genesis Framework · WordPress · Log in