Rally
In short
A strong short-term price increase following a decline
A rally is when prices bounce back up strongly after falling. Dead cat bounces (brief rallies in a continuing downtrend) can trap buyers. A confirmed rally breaks above key resistance and is accompanied by rising volume.
Rallies can be relief rallies in downtrends (short-covering, oversold bounces) or the beginning of new bull markets. Confirming a genuine rally vs a dead cat bounce requires watching volume, breadth (how many stocks are rising), and whether the market can hold above key moving averages.
Related concepts
- Bull Market — A bull market is when prices are rising and investors are optimistic. Officially, a bull market begins when the market rises 20% from its low. Bull markets are historically much longer than bear markets.
- Correction — A correction is a drop of 10-20% — smaller and more common than a bear market. Corrections happen roughly once a year on average. They're painful but healthy — they prevent bubbles from inflating too far.
- Support Level — A support level is like a floor — when a stock falls to that price, buyers tend to step in and it bounces back up. The more times a price level holds, the stronger the support.
- Volume Profile — Volume profile shows where most trading happened at different price levels. Heavy trading at a price means traders consider it fair value. Low trading zones are areas where price moves fast.