Technical Rally

Definition

The term technical rally is used to describe a sudden increase in a financial market, or an individual security, prompted by factors such as price momentum.  A technical rally is considered temporary, since the fundamental factors affecting the security's value have not changed.

Explanation

Financial markets, including those that offer commodities, bonds, and stocks, typically demonstrate an upward or downward trend over time.  A technical rally is a sudden reversal of a downward trend in the value of a financial market or security.  While the price movement is the opposite of a market correction, the reason for the increase in price is due to technical factors such as price momentum or resistance levels.

Longer term trends in the price of a security, or a financial market such as the stock market, is typically the result of fundamental analysis.  The security's value is a result of factor such as earnings growth projections.  Technical rallies are the result of non-fundamental factors and manifest themselves as a sudden increase in the price of a security.

Related Terms

January effect, gray swan event, tortoise rally, October effect, Santa Claus rally