Rainbow is one of the 8 Harvest Sprite Pokemon/one of the Quest Pokemon in the Ancient Cave.
Rainbow is only obtainable when you find all the other 7 Harvest Sprite Pokemon.
When finding Rainbow, you will obtain it as an egg and will be placed directly into your party if there is a free slot. If there is no free slot in your party, you will not get the egg, but encountering Rainbow will still be possible until you accept the egg.
Note: Hatching the egg will not count towards your shiny chain.
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Rainbow does NOT evolve.