Retracement

A Retracement is a temporary reversal of the prevailing trend in a financial market, such as the stock market or the foreign exchange market. It represents a brief price decline within an overall uptrend (bull market) or a short-lived price increase within a downtrend (bear market). It often occurs as profit-taking from investors who have benefited from the preceding trend, or as short-term fluctuations caused by changing market sentiment, technical indicators or news. Retracements can be healthy corrections that allow an asset to regain momentum and continue its original trend, or they can indicate a potential change in trend if they become deeper or last for a prolonged time. Analyzing retracements involves identifying support and resistance levels and using tools like Fibonacci retracements to predict potential price targets.

Retracement meaning with examples

• Following a significant rally in the technology sector, the market experienced a Retracement as investors began to take profits. This allowed for a temporary decrease in prices before the market continued its overall upward trajectory, bouncing off of a strong support level and resuming its bull run. Several investors then bought into this low point.
• During a bearish trend in the cryptocurrency market, a small Retracement occurred, giving some traders the false hope of a market recovery. However, the Retracement proved short-lived, and the asset quickly continued its downward spiral, highlighting the persistence of the bear market.
• A financial analyst carefully studied the Retracement in the oil price caused by unexpected production increases. She used technical analysis to determine if the Retracement marked a shift in the trend, which had been steadily rising for the last quarter, and assess how deep this decrease could go.
• The foreign exchange market observed a brief Retracement in the value of the dollar after an interest rate hike, as investors adjusted their positions. This correction offered opportunities for some currency investors, allowing them to make further investments in the short-term.
• Synonyms: pullback, correction, dip, decline, retreat, reversal.
• Antonyms: rally, advance, surge, rise, acceleration, continuation.