What is a pullback?

A pullback is a brief drop or pause in a generally upward trend of a stock or other asset's price. Investors who believe that the pullback will be short take 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 the lowest price that a stock is likely to reach before buyers return.

Key Takeaways

A pullback is a temporary reversal in the upward trend of a stock or other investment's price.

A pullback generally 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.