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Strategies & Market Trends : The Dead Cat Bounce Theory
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To: stockvalinvestor who wrote (22)3/19/1997 10:57:00 PM
From: Rocketman   of 1836
 
Another variation might to be to limit your buys to only $10,000 each day, and pull the profits. Of course if you lose on a day, you would replenish the $10K from the profits, or if you go below $10K total, you would buy with whatever you have total until you get back above 10K or go bust. Just a thought. Another way to put the fix in would be to make a judgement of which of the bottom dwellers seemed to have the best chance of being an overreaction as opposed to some real serious hurt to the fundamentals that would tend to cause it to slide even more. A look at the intradays might help. I would figure that something that slid all day would be lower risk than something that dumped on late day news that hadn't been yet widely disseminated. Another strategy might be to see if the bounce had started by the end of the day, giving a clue as to the trend the following day. Also, you might want to declare any cat that is dead two days running to be truly dead, and gets disqualified the second day (I don't think you want to wait for nine days for all of its lives to run out). I'm seriously thinking about tossing $10K at a version of this theme. I think the most important part is the dead cat portion - the big loser of the day, whether you hold it all day or not seems to be a judgement call as not all corpses bounce alike. Some bounce faster than others.

Later,

dw
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