Pullback

A pullback is a short-term move against the direction of a larger, still-intact trend. If a stock has been climbing for weeks and then dips for a few days before resuming higher, that dip is the pullback — the main trend is up, and the pullback is a temporary pause or retracement within it, not a change in direction.

Pullbacks happen because trends rarely move in a straight line. Traders take profits, short-term buyers get shaken out, or news causes a brief bout of selling, and price drifts or drops back toward some earlier reference point — often a moving average, a prior breakout level, or a round number — before buyers step back in and push price to new highs. The same idea works in reverse for a downtrend: a brief bounce upward within an ongoing decline is also called a pullback.

The nuance that trips up beginners is that a pullback and a reversal look identical while they are happening. There is no rule that tells you in real time whether a given dip is "just a pullback" that will resume the trend, or the start of a genuine trend change. Traders lean on things like how far price has retraced (a shallow dip is more pullback-like than one that erases most of the prior move), whether volume dries up on the way down (suggesting a lack of selling conviction), and whether price holds above a support level like a moving average. None of these are guarantees, which is why the original caution about not relying on a single indicator is reasonable.

Because "pullback" is a descriptive label rather than a strict technical term, different traders will draw the line differently — one person's pullback is another person's reversal, especially in hindsight when the two turn out to be the same thing.