DEFINITION of 'Technical Correction'

A decrease in the market price of an asset or entire market after extensive price increases. A technical correction occurs even when there is no evidence that the increasing price trend should cease. It is often caused when investors temporarily slow down their purchases of securities, which commonly leads to a pullback toward a short-term support level.

BREAKING DOWN 'Technical Correction'

A technical correction is a drop in stock or market prices when there is no fundamental reason for a decrease. After a steady increase in value, investors may become more cautious buyers at the higher prices and look to reevaluate the market, resulting in a decrease in purchases. The drop in purchase volume will stop the upward price trend from continuing while the market re-evaluates the short-term direction.

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