Debt Dictionary


Investment Dictionary -> Rally

What is a rally?

Rally, in stock market refers to a sudden, significant rise in price of a particular security or in the total market. This can especially happen after a continuous period of falling prices. Suppose the stock market has dropped in the morning, and the investors consequently make haste to purchase companies at lower prices, then the stock market is said to have rallied.

It is caused due to a huge sum of money that enters the market, bidding the prices up. The magnitude or length of a rally is dependent on the depth and volume of buyers, as well as the amount of selling they do. Thus if there is a greater number of buyers but less investors intending to sell, there is likelihood of a large rally. If the number of buyers matches the number of sellers, the rally most likely will be of a short tenure with the price movement being minimal.

Rally is a period of sustained increase in stocks, bonds and prices of indexes. This type of situation can take place either during a bull market or a bear market.

Bear market rally

A bear market rally refers to a rally that occurs after a great amount of downward trend. A bear market rally apparently is an indication of the markets making recovery. In other words it is turning around to a bull market. However this might signify a temporary trend. Because of the inherent unpredictability associated with this rally, it is also sometimes termed as a sucker rally. Many people are misguided into investing seeing the upward trend only to be deceived shortly, when markets do fall.

Bull market rally

This is a sustained, prolonged period of rising investment prices, faster than the historical average. One of the significant periods of bull market rally in the U.S. was in the early 1990s.

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