A major rebound in a downtrend is driven by existing holders trying to save themselves, short-term bottom-fishing funds joining in, and bears temporarily taking profits. Large investors trapped at higher levels earlier on don’t want to take the loss and dump their holdings outright. They push the price up to create the illusion of a “bottom” or “reversal,” attracting retail traders on the sidelines to buy the dip and take over their positions, so they can gradually reduce their holdings and exit.

During a rapid plunge, many stop-loss and liquidation orders are dumped all at once, triggering a panic-driven stampede. Once the panic selling has been exhausted, selling pressure dries up in the short term. Even a little buying can then drive a sizable rebound—what’s commonly called a panic-bottom bounce.

The broader moving averages and position distribution structure have not reversed. If the rebound fails to make a new high, the price will most likely go on to make a new low, making this a recovery within a downtrend.

Also, a lower wick isn’t just a signal to buy the dip; it can also indicate insufficient turnover, making it likely to get filled in.