When a stock price decreases, it rarely just hurls straight down without experiencing a few peaks along the way. One extreme example of this is the dead cat bounce: when a stock price decreases, it may seem to undergo a slight recovery before returning to its previous low.
A bounce happens when pessimism begins to set into a bear market. If the market continuously displays a downward trend for weeks on end, the conditions for a bounce begin to foster — and it’s made possible by the way different types of traders act.
As you’re probably well aware, the two main forces at play in economics are supply and demandIn the case of a bounce, the supply force is made up of the investors who are shorting, while investors drive demand because they believe the stock price is about to increase.