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Rally Or Reaction

Updated on March 1, 2023

A rally or reaction in the technical analysis refers to a sustained upward move in the price of an asset like a stock or a commodity. A rally usually occurs when the market sentiment shifts from bearish to bullish. This is on account of the investors becoming more optimistic about the asset’s future prospects. During a rally, the price increases steadily over a period of time and there are limited pullbacks or corrections.

What is the meaning of reaction?

In technical analysis, a reaction refers to a temporary downward move in the asset’s price which ius followed by an extended upward move. A reaction can be seen as a correction to an overbought market. This is on account of some investors taking profits and others entering the market to sell. This leads to a decline in the asset’s price. The reaction typically lasts for a short period of time. The asset’s price may either return to its previous level or continue to fall, depending on the underlying market conditions.