"It's called the Dead Cat Bounce," Professor Charlton said. He looked around his tutorial group: four teenagers in their first year of university. "A theoretical phenomenon in the stock market." He reached for a foolscap pad and a pen so he could draw a diagram.
The students leaned forward. They were eager to learn. While economics was not supposed to be an exciting discipline, obvious passion in the students was appreciated.
The professor quickly sketched a graph. "So, here we have a stock. Its price rises and falls due to various influences. But," the graph acquired a sudden, downward slope, "it undergoes a sudden drop. A terminal drop from which it will never recover. Just before it hits rock bottom, the stock recovers," a slight upward tick, "then makes its final plunge."
One of the students, a young lady by the name of Maria Vries, spoke up. "I remember you telling us that variations in a stock are random. Does this mean that it would be impossible to distinguish a Dead Cat Bounce from any other movement?"
Professor Charlton nodded. "That's why this is just a theoretical thing. The reason behind it is easy to understand - opportunists buying low in a hope to sell high. But you would need more information than would likely be available at that point."
"If you could tell, though, you would have a an advantage in the stock market, though?"
"Oh yes. If you could put it into a trading algorithm then you could gain a slight advantage. But a slight advantage is just enough."
Maria sat back. She paid attention to the rest of the tutorial, but it was only in passing. Her mind was already occupied, thoughts and ideas being formed just below the conscious surface. As the students left the professor's office, Maria's thoughts were interrupted.
"Hey!"
"What is it Pete?" Maria smiled at her fellow student.
Peter waved a hand in front of Maria's face. "You looked a bit out of it. I was just wondering if you were alright."
"I'm fine. I was just thinking." A memory suddenly rose to the surface of Maria's mind. "Tell me, do you still have that inheritance?"
"Some of it." Peter frowned. "Why?"
"How would you like to help me out in a project?"
