Pullback

A pullback is a price movement against the continuing dominant downtrend that is occurring at that time. That is to say, it is a price increase, which touches a previously exceeded support and then bounces down and continues the downtrend.

Pullback

Pullback is the opposite of throwback, produced in uptrends.

Pullback in technical analysis

Technical analysis is based on studying the stock market charts of assets from a series of techniques, in order to predict future price movement. One of these avenues is to identify pullbacks.

To identify this movement, the operator has previously set on the chart the floors or supports that the price has previously exceeded. A support is a price level lower than the current price that acts as a floor, since the strength of the buyers is greater than that of the sellers, which does not allow the price to pierce that level to the downside. When the price hits the support, the price can either support and bounce higher or pierce it and lower.

In the case of the pullback, the price touches the resistance and then falls without piercing it, continuing its downtrend. That is, the pullback is the movement that occurs when the price falls again, after the rise has occurred and touched the ceiling. This movement is known as a pullback.

Interpretation of reversals prior to the pullback

These movements represent momentary short positions or short positions. The price rises at a time when other technical indicators point in favor of the downtrend in price.

If this change in trend was not punctual but permanent, then we would be talking about what is known as a trend reversal.

These movements in price are easy to identify in hindsight, but not so easy to detect at the moment as you are not sure which chart will draw the price in the future. It is also not possible to guess if that movement will be eventual or is the beginning of an upward trend reversal. If price broke through resistance, then it is possible that it was a reversal and an uptrend.

Example of a pullback

Pullback
Pullback Example