A pullback is a pause or moderate drop in a stock or commodities pricing chart from recent peaks that occur within a continuing uptrend. A pullback is very similar to retracement or consolidation, and the terms are sometimes used interchangeably. The term pullback is usually applied to pricing drops that are relatively short in duration - for example, a few consecutive sessions - before the trend resumes.
What Does a Pullback Tell You?
Pullbacks are widely seen as buying/selling opportunities after a security has experienced a large upward/downward price movement.
For example in an uptrend market, a stock may experience a significant rise following a positive earnings announcement and then experience a pullback as traders with existing positions take the profit off the table. The positive earnings, however, are a fundamental signal that suggests that the stock will resume its uptrend.
Most pullbacks involve a security’s price moving to an area of technical support, such as a moving average or pivot point, before resuming their trend.
What Does a Pullback Tell You?
Pullbacks are widely seen as buying/selling opportunities after a security has experienced a large upward/downward price movement.
For example in an uptrend market, a stock may experience a significant rise following a positive earnings announcement and then experience a pullback as traders with existing positions take the profit off the table. The positive earnings, however, are a fundamental signal that suggests that the stock will resume its uptrend.
Most pullbacks involve a security’s price moving to an area of technical support, such as a moving average or pivot point, before resuming their trend.