Profit Taking Correction

A market correction that results from investors’ sales of securities to cash in on capital gains. This is usually the case because investors tend to sell stocks to lock in profits in an attempt to defer taxes from capital gains after the new year begins. The period of profit taking correction represents a break (such as the January break) during which investors tend to dispose of their long positions in stocks, and then resume their holding of long positions in stocks later (e.g., in the next month, and typically up to April). The correction is triggered by oversold momentum.