If you’ve ever seen a cat fall from a tree, you know it doesn’t crash to the ground and stick the landing. Instead, it bounces before coming back down.
Stocks often act like cats falling from trees, especially momentum stocks that have reached obscene heights. That’s because many traders have short memories and buy dips thinking they are getting good value, even in the face of screaming sell signals. These bounces are short lived as the bounce fails and price continues lower, forming the classic “dead cat” bounce.
The software sector is full of potential dead cat bounce short setups. While it has been the hottest sector of 2019, we are now seeing subtle sell signals and money rotates to other areas. In today’s video, I show you exactly how to trade this setup in the software sector. You will learn the following:
- The elements of the dead cat bounce setup
- How to identify a potential top
- My favorite dead cat bounce plays
- The best longs if the software sector recovers