Rally vs pullback
A rally is a rise in price over a stretch of time within a trend. A pullback is a short drop in price after a rally, within a trend that is still moving in its original direction. Comparing the size of each rally and the depth of each pullback helps you check whether a trend still deserves its label.
Rally and Pullback side by side
| Rally | Pullback | |
|---|---|---|
| What it is | A rise over a stretch of time within a trend | A short drop after a rally, within the same trend |
| Direction | Up (in an uptrend) | Down (in an uptrend) |
| What to check | Step size: is it as big as the one before? | Depth: does it hold above the previous pullback low? |
| Healthy sign | Steps of similar or growing size | Shallow, stopping well above the last low |
| Warning sign | A smaller step than the one before | A slide below the previous pullback low |
| Proof of a turn? | No; a clue | No; a clue |
Steps and dips
Inside a trend, price moves in steps: rallies up and pullbacks back. A pullback does not by itself mean a trend has ended. It is part of how a healthy trend moves.
Step size
Compare the latest rally with the one before it. A trend that is still healthy tends to take steps of similar or growing size. A smaller step is a clue that the trend may be running low on energy.
Pullback depth
After a rally, how far does the price fall back? Does it hold above the low set by the previous pullback? A steady trend keeps its dips shallow. A pullback that slides below the previous low marks exactly where something changed.
Clues, not guarantees
Neither shrinking steps nor a broken pullback low proves the trend is finished, and a trend can recover from either. They are reasons for a closer look. Maetis does not give trading advice.
A tiring trend (hypothetical numbers)
A stock rallies from ₹500 to ₹590, a gain of ₹90. It pulls back to ₹555, holding well above the earlier low of ₹500. A second rally reaches only ₹580 from ₹555, a gain of ₹25, and the next pullback slips to ₹548, below ₹555. The second rally was smaller and the second pullback broke the previous low: two clues, not proof.
Common questions
- What is a rally?
- A rise in price over a stretch of time within a trend.
- What is a pullback?
- A short drop after a rally, within a trend still moving in its original direction.
- Is a pullback a sign the trend is over?
- No. It is part of how a trend moves. A deeper pullback or a smaller rally are clues to look closer.
- How can I tell if a trend is tiring?
- Compare the size of each rally with the last, and see whether pullbacks stay above the previous pullback low.
Related terms
This page compares ideas and does not recommend either one. Maetis does not give investment, tax or legal advice.