Pullback
A pullback is a short drop in price after a rally, within a trend that is still moving in its original direction. A rally is a rise in price over a stretch of time within a trend. Watching how big the rallies are and how deep the pullbacks go helps you check whether a trend still deserves its label.
Rally and pullback
A trend is the general direction a price has been moving. Inside an uptrend, price rises in rallies and falls back in pullbacks, so the line moves in steps. A pullback does not by itself mean the trend has ended: it is part of how a healthy trend moves.
The label does not update itself
A stock can keep the name uptrend for weeks after it has quietly started running low on energy. Only you can check whether the trend still behaves the way it did when you first named it. Two things to look at are step size and pullback depth.
Step size and depth
Step size asks how big the latest rally is compared with the one before. A healthy trend tends to take steps of similar or growing size. Pullback depth asks how far the price falls back after a rally, and whether it holds above the low set by the previous pullback.
Clues, not guarantees
Shrinking steps or a broken pullback low do not prove the trend is finished, and a trend can recover from either. They are clues that the trend deserves 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, and the next pullback slips to ₹548, below ₹555. The smaller step and the broken pullback low are two clues that the trend may be tiring. Neither proves it.
Common questions
- What is a pullback?
- A short drop in price after a rally, within a trend that is still moving in its original direction.
- Does a pullback mean the trend is over?
- No. Pullbacks are a normal part of a trend. A deeper pullback or a smaller rally are clues to look closer, not proof.
- What is a rally?
- A rise in price over a stretch of time within a trend.
- How do I tell if a trend is weakening?
- Compare the size of each rally with the one before it, and check whether pullbacks stay above the previous pullback low.