What term describes a brief, sharp rally in a downtrend followed by continued decline?

• A. Dead Cat Bounce
• B. Dogs of the Dow
• C. Pigs Getting Slaughtered
• D. Market Rally Reversal

Answer: (A)

A dead cat bounce describes a brief, sharp rally that occurs within a downtrend and is not followed by a sustained reversal. The idea is that even after a steep drop, prices bounce back briefly—often on short-covering or a bit of positive news—but then resume falling, taking out the previous lows. This makes the bounce a false signal of a trend reversal rather than a real turning point.

This term fits because it emphasizes the temporary nature of the rebound and the expectation that the overall downtrend continues. Traders look for follow-through evidence—like prices breaking above prior highs with strong volume or a failure to make new highs—to confirm a true reversal; without that, the rally is judged a dead cat bounce.

Other terms don’t describe this phenomenon. For example, one is a long-standing Dow-based stock-picking strategy, another is a sensational bear-market phrase about selling pressure, and another is a generic phrase for a reversing rally, not necessarily connected to a failed bounce within a downtrend.