A pullback is a pause or moderate dip in the price of a stock or commodity that occurs within a continuing advance.

A pullback is almost the same as retracement or consolidation. The phrase “pullback” refers to price declines that last for a short period of time – say, a few successive sessions – before the uptrend restarts.

After security has undergone a big upward price movement, pullbacks are commonly viewed as buying opportunities.

For example, after a strong earnings report, a stock may see a big surge before reversing as traders with existing positions take profit. Positive earnings, on the other hand, are a fundamental signal that the stock will continue to rise.

Before restarting their uptrend, most pullbacks see a security’s price move to a technical support level, such as a moving average or pivot point. Traders should keep a close eye on these critical support levels, as a break below them could suggest a reversal rather than a retreat.

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