Is it just a retracement or a reversal? Here's how to tell the difference

One needs to build a separate trading model to identify retracement and reversal

Retracement and reversal are two diverse aspects of trading. While the former depicts the occasional correction in stock prices or indices, which are considered healthy, the latter means a deeper decline and change in sentiment. In order to identify them, the foremost requirement is the trader's ability to determine the trend of a stock, which requires knowledge of fundamental and technical analysis.

Retracement indicates a short-term weakness which witnesses buying momentum at crucial levels called 'supports'. The support levels may vary and depend on various aspects of price like volume, selling pressure, candlestick patterns, and overbought/oversold conditions.

Reversal, on the