Bounce

A bounce is a short-term move upward in price that happens right after a decline, without necessarily signaling any change in the bigger trend. The price falls, hits some level where selling pressure eases or buyers step in, and then pops back up for a period before the market decides what to do next.

The mechanics behind a bounce are usually simple: after a fast or extended drop, some traders who sold short buy back their positions to lock in gains (called covering), while bargain hunters see the lower price as attractive and start buying. Both groups pushing in the same direction at once can create a quick, visible move higher even if nothing about the asset's underlying situation has changed.

The nuance that trips people up is telling a bounce apart from a genuine reversal. A bounce is, by definition, temporary and often gives way to the price resuming its original downward move — this specific pattern is sometimes called a "dead cat bounce," the idea being that even a dead cat will bounce if it falls far enough, but it isn't coming back to life. There's no reliable way to know in advance whether a given bounce is the start of a real trend change or just a pause inside a continuing decline; that only becomes clear afterward.

Bounces can happen on any timeframe, from a one-minute chart to a multi-week chart, and the word itself doesn't tell you the timeframe or the cause — only that price moved down, then sharply back up.