Why The Dead Cat Bounce In TAL Education, New Oriental Could Mean More Trouble Ahead

When stocks make large and rapid sell-offs, sometimes they get overdone. Investors panic and are willing to accept any price for their shares. These moves are typically followed by some type of rebound.

But when the rebound is small and only temporary, it's known as a dead cat bounce. The downtrend trend often resumes after these bounces.

This seems to be the case with shares of TAL Education Group TAL and New Oriental Education & Technology Group Inc. EDU.

These stocks had already been trending lower, but when the Chinese Government outlawed for-profit education, they each went into freefalls. After a brief halt, they appear ready to resume their downtrend.

TAL is trading around the $5.80 level.

EDU is trading just above the $2 level.