# Relief Rally Definition & Conditions That Trigger It

## What Is a Relief Rally?

A relief rally is a respite from a broader market [sell-off](https://www.investopedia.com/terms/s/sell-off.asp) that results in temporarily higher securities prices. Relief rallies often occur when anticipated negative news winds up being positive or less severe than expected. A relief rally is one type of [bear market rally](https://www.investopedia.com/terms/b/bear-market-rally.asp).

Market participants price in many different types of events, such as the release of a company's [quarterly earnings report](https://www.investopedia.com/terms/e/earningsreport.asp), election results, interest rate changes, and new industry regulations. Any of these events can trigger a relief rally when the news is not as bad as expected. Relief rallies happen in many different asset classes such as stocks, bonds, and commodities.

### Key Takeaways

*   A relief rally is characterized by a rise in securities prices that acts as temporary relief from broader selling pressure.
*   Relief rallies generally are seen during a secular bear market.
*   One can be triggered by slightly good news, with short-sellers helping push the stock higher by covering their positions.

## Understanding a Relief Rally

A relief rally often happens amid a [secular](https://www.investopedia.com/terms/s/secular.asp) decline in the market or persistent selling pressure that lasts for multiple days. Relief rallies happen for individual stocks, as well. Slightly better-than-expected financial results sometimes ignite relief rallies for beaten-down stocks with a long history of missing analyst expectations for many quarters.

Sometimes, even a lower-than-expected loss can ignite a relief rally, or they might be triggered by a more positive tone on a company [conference call](https://www.investopedia.com/terms/c/conferencecall.asp) with analysts. Part of the reason is that slightly good news sometimes causes short sellers to buy stock to cover their positions, which can trigger a [short covering](https://www.investopedia.com/terms/s/shortcovering.asp). This is done as short-sellers look to avoid further losses as prices rise.

Because bear markets last for long periods of time, they can exact an emotional drain on investors hoping for a market turnaround—hence the "relief" when signs of a bounce appear. Market advisors warn against emotional responses to [market volatility](https://www.investopedia.com/terms/v/volatility.asp), as investors may panic and make judgment errors regarding their holdings.

> **Important**
>
> Identifying a relief rally can be challenging, even for experienced traders. In many cases, such a rally can last for weeks or even months before the continuation of a longer-term downward trend.

## Special Considerations

A relief rally does not necessarily spell the end of a secular decline, however. Both the aftermath of the [dotcom bubble](https://www.investopedia.com/terms/d/dotcom-bubble.asp) and the [2007–2008 financial crisis](https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp) saw several relief rallies for stocks, only to see renewed fears push market prices lower again.

Sharp relief rallies that occur in otherwise bearish markets are sometimes called a [dead cat bounce](https://www.investopedia.com/terms/d/deadcatbounce.asp) or [sucker's rally](https://www.investopedia.com/terms/s/sucker-rally.asp). This type of rally may fool some into thinking there is a reversal in the trend, only to find the bear market continuing soon after.