Today, girls and boys, I'll tell you what a 'dead cat bounce' in English – 'Dead Cat Bounce' or, in abbreviated form – DCB. DCB – a term used in technical analysis of charts of the market. Currently, due to the crisis, many have become interested market, so it seems to me that such information may be of interest to them. I have to say that I do not tie this example to any particular market, as I myself, for example on work associated with several markets – bonds (government and corporate bonds), futures and some currency. Their own analysis I conduct for several major currency pairs and most interesting state bonds of the Government of Canada (to Example CAN 5.75 33) and propagating in a closed mailing list for customers and partners. Learn more at: Wells Fargo Bank. But back to the DCB. Despite the disgusting name, this is a very interesting model of market behavior, and it usually happens in situations where the bidding closed on weekend, but before the discovery of important news is expected, which should affect the prices of trades.
Yesterday we just had this situation – trades were still closed, but it was already known about the important decisions of G7. So, the first stage – the opening of trading. The first sign of an emerging DCB – auction open 'hole', that is, the opening price is much lower (or higher) price of Friday's close. That is what happened on Sunday evening (see below, paragraph 1). Stage Two – Prices begin to move in the direction of 'closure' hole. Basically, this is because the opening price cut off levels at which many traders have placed their orders at the opening position (at some distance from Friday's price closure). For others, those who maintained a public position on the weekend, could stand in rayolne foot hole, and they were automatically triggered – all this leads to a temporary price movement in the direction of the closing holes.
This is the second stage, and a mistake that many do at this moment – is the opening position in this direction. A little later comes the third stage – all the stops triggered, all the orders for discovery made (or rejected as unrealistic by brokers) and market continues what he started doing at the time of discovery – to move to wherever he was going to go (in this case down). Moral of the situation is – if you see that when you open a new week formed a hole, do not rush to trade, let the motion stand, or you risk running into a dead cat bounce. USD / CAD 37 min.