A pullback describes price action when there is a tendency of a trending market to retrace a portion of the gains before continuing in the same direction.
It is a temporary pause or dip in an asset’s overall trend.
The term is sometimes used interchangeably with “retracement.”
A pullback is a short-term move in the opposite direction of the longer-term trend, which can offer an opportunity to join an uptrend at a relatively favorable price.
A pullback tells you that the overall market trend has temporarily paused.
This could be down to several factors, including a momentary loss of trader confidence after certain news or economic data releases.
A pullback should not be confused with a reversal, which is a more permanent move against the prevailing trend.
You’ll need to determine whether the price drop is a pullback rather than an outright trend reversal.