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Technical Analysis Technical Analysis Basic Education
Pullback: What It Means in Trading, With Examples
By Brian Dolan Updated August 04, 2024
Reviewed by Samantha Silberstein
Part of the Series
Guide to Technical Analysis
What Is a Pullback?
A pullback is a brief decline or pause in a generally upward price trend of a stock or other asset. Investors who are confident that the pullback will be brief use it as a buying opportunity. A pullback can occur for many reasons, some of which are unrelated to the fundamentals of the stock.
Technical analysts, who track the price movements of stocks to establish trends, identify the "support level," or lowest price that a stock is likely to reach before buyers step back in.
Key Takeaways
A pullback is a temporary reversal in the upward price trend of a stock or other investment.
A pullback typically lasts only a few consecutive sessions.
Pullbacks can provide an entry point for new investors when other technical indicators remain bullish.
Investors can use limit orders or stop entry orders to take advantage of a pullback.
What Is a Bitcoin Pullback?
The most volatile assets tend to experience the most severe pullbacks. Cryptocurrency traders respond to the same pressures that influence stock traders, plus others that are unique to the cryptocurrency world. The price of a Bitcoin dropped more than 10% in the week that ended on Aug. 2, 2024. The same day, the Nasdaq closed at 10% below its record level, officially entering correction territory.
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What Does a Pullback Tell You?
A pullback is similar to a retracement or consolidation, and the terms are sometimes used interchangeably. The term pullback is usually applied to short-lived price declines—only a few consecutive sessions—before the uptrend resumes.
Pullbacks are widely seen as buying opportunities if the stock has been showing a generally upward price movement.
For example, many stocks experience a significant increase after a positive earnings announcement, followed by a sharp pullback as traders sell shares to take profits.