The Royals are now four points outside the npower Championship's top two while Forest are four points adrift of the play-off places.
Davies said: "You have certainly been looking at candidates to finish in the top two this afternoon. They might have work to do but they have momentum on their side and have the qualities that could take them all the way.
"We're obviously disappointed but there is still everything to play for as far as we are concerned. There are still 18 points at stake and that's an awful lot. If anybody thinks the top six will stay as it is until the end of the season, I beg to differ.
"For a lot of clubs there is still all to play for in the promotion issue and it will go down to a photo finish - I'm sure of that. We will go again in Tuesday's match against Burnley and do everything we can to get ourselves where we want to be in May.
"We showed our naivety and our immaturity today but what I will say is that this young squad of ours just keeps going and they will keep going to the very end.
"There are certainly no complaints from me about what I am getting from this group. They are giving me and the coaching staff their very best."
Reading boss Brian McDermott was delighted with a sixth straight win.
McDermott said: "We want to try and win every game and to come to a place like this, face a side with Forest's tradition and win is an absolute credit to our players. I have got so much pride in the spirit and determination of the whole group.
"Having played so well we would have been really upset not to get the win today. It was a great game and we managed to get there in the end but I really felt we were full value for the three points.
"We had two penalties given against us but I thought we overcame those disappointments really well and kept playing our football. Even at 3-3 we were trying to win the game and we try and do that everywhere we go.
"I thought the first penalty was soft and I didn't think the second one was a penalty but we all make mistakes and you have to get on with it.
"We're on a good run but we have still got six games to go. We have 24 players with us and the staff and we are staying in the area to prepare for our game against Scunthorpe on Tuesday night. They have just beaten Queens Park Rangers 4-1 so that just goes to show what this league is all about."