The Dead Cat (almost) Always Bounces
When I'll be looking to buy high growth stocks.
Hi all,
I had planned to put out the next thematic primer today, but after the price action over the last few days I think discussing the market broadly is a bit more important. I will have the primer posted within the next week or so, when market conditions are a bit more accommodating.
If you drop a ball from high enough, the first thing it does after hitting the ground is bounce. Sometimes higher than you’d expect. For a moment it almost looks like it’s reversing direction and defying gravity… but it doesn’t. Every bounce loses a little energy. The bounce velocity begins to fade and eventually the ball stops bouncing altogether and settles where gravity was taking it all along.
The bounce is deceptive. Initially it looks strong because it follows major downward pressure, and it also feels meaningful because it comes after a big or quick move lower. But most of the time, it’s simply part of the move down rather than the start of a real reversal.
Markets have been behaving in a very similar way.
I’ve seen many try to knife catch these 2023-2025 leaders. Reality is that many of these have corrected so viciously off their highs, it’s likely they need time to base and digest some of the selling they’ve experienced over the last few months. But that doesn’t mean they can’t or won’t bounce.
We’ve seen multi year leading stocks like Palantir, Robinhood, RocketLab, Applovin, etc. all get knocked off more than 50% from their highs. Groups like software and crypto as well. At some point they’ll bounce… but will that be the bottom?
Maybe, but the important thing to note is that you don’t have to be the first one in. When is the right time to jump back into these names? Let me outline exactly what I’m going to look for across the high growth tech names that will tell me the bottom is in.