Rally
A rally is a sustained increase in prices, typically driven by positive sentiment, buying pressure, or bullish catalysts. Rallies can occur within uptrends, as corrections within downtrends (bear market rallies), or as reversal moves from lows.
Understanding the Concept
• Duration ranges from hours (intraday rally) to months • Volume typically increases during healthy rallies • Bear market rallies can be sharp but ultimately fail • Relief rally: sharp bounce after oversold conditions
Real-World Example
After dropping 30% on recession fears, the S&P 500 rallies 15% over three weeks as economic data improves. Shorts cover, sidelined cash enters, and momentum builds. Volume picks up on green days. Bulls declare the bottom is in, though bears argue it's just a bear market rally.
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