A Temporary reversal in the direction of a stock’s price that goes against the prevailing trend. A retracement does not signify a change in the larger trend. On a chart where a stock’ s price is generally headed upward, retracements are the small dips in price that the stock experiences during its overall upward trend. Whether an investor identifies a change in a stock’s direction as a retracement or a reversal will impact how he responds to it.
A retracement is a correction that occurs during a prevailing trend. It is often regarded as a period of rest before the trend continues in the original direction.
Retracements are short-term changes within a longer-term trend, while reversals indicate the end of a larger trend & the beginning of a new trend.It is always difficult to tell whether it is a retracement or a reversal. Technical analyses tries to distinguish between the two using Fibonacci retracements, Pivot point , support & resistance levels & trendline support & resisitance levels.