Reaction

A A A

DEFINITION

A reversal in the movement of a security's price. Reaction is most often associated with a downward movement in the price of a security after a period of upward movement, as investors sell off shares or decrease the volume of buy orders for fear of the security being overvalued. Reactions are likely to be mild and lead to a slight increase or decrease in price, rather than a large change in value. A reaction is similar to a correction but lacks the same intensity.

INVESTOPEDIA EXPLAINS

Reactions are generally considered to be positive for the overall health of the market, since unending price increases can cause inflation or result in an even larger price drop if a company doesn't meet expectations. A reaction is likely to prevent events such as runs or high volume sell offs at later dates.


RELATED TERMS
  1. Correction

    A reverse movement, usually negative, of at least 10% in a stock, bond, commodity ...
  2. Futures Contract

    A contractual agreement, generally made on the trading floor of a futures exchange, ...
  3. Reversal

    A change in the direction of a price trend. On a price chart, reversals undergo ...
  4. Break

    A term used in futures markets to describe a rapid and sharp price decline. ...
  5. Bulge

    A fast increase in a security's or commodity's trading price. Bulge is an informal ...
  6. Security

    A financial instrument that represents: an ownership position in a publicly-traded ...
  7. Overreaction

    A market hypothesis stating that investors and traders react disproportionately ...
  8. Bid Wanted

    An announcement by an investor who holds a security that he or she is looking ...
  9. Money Flow Index - MFI

    A momentum indicator that uses a stock’s price and volume to predict the reliability ...
  10. Mass Index

    A form of technical analysis that looks at the range between high and low stock ...
Related Articles
  1. Is A Reversal On The Way? Consult Traders' ...
    Active Trading

    Is A Reversal On The Way? Consult Traders' ...

  2. 4 Key Indicators That Move The Markets
    Fundamental Analysis

    4 Key Indicators That Move The Markets

  3. When Is A Bull Market Not A Bull Market?
    Trading Strategies

    When Is A Bull Market Not A Bull Market?

  4. Forces That Move Stock Prices
    Active Trading Fundamentals

    Forces That Move Stock Prices

  5. Market Cycles: The Key To Maximum Returns
    Active Trading

    Market Cycles: The Key To Maximum Returns

  6. The Stock Cycle: What Goes Up Must Come ...
    Options & Futures

    The Stock Cycle: What Goes Up Must Come ...

  7. Add Some Sin To Your Portfolio With ...
    Chart Advisor

    Add Some Sin To Your Portfolio With ...

  8. Finding The Trend With Aroon
    Active Trading

    Finding The Trend With Aroon

  9. Are These Battered Stocks Making A Turnaround?
    Chart Advisor

    Are These Battered Stocks Making A Turnaround?

  10. Oil Chart Suggests That Now Is The Time ...
    Chart Advisor

    Oil Chart Suggests That Now Is The Time ...

comments powered by Disqus
Hot Definitions
  1. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  2. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  3. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  4. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  5. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
Trading Center