Advance-Decline Line
With so much talk of this indicator in the media, I though it would be useful to throw some light on this market breath indicator.
The Advancing-Declining Issues is calculated simply by subtracting the number of declining issues from the number of advancing issues.
This difference between the number of advancing and declining issues is the foundation of many market breadth indicators. These indicators include the Advance/Decline Line, Advance/Decline Ratio, Absolute Breadth Index, Breadth Thrust, McClellan Oscillator and Summation Index. Indicators that use advancing and declining issues in their calculations are called market breadth indicators.
The AD Line peaks out well ahead of the more widely followed market indices and averages. It provides such useful information as:
Overall market strength
Rising or falling trends
Whether the trend is intact, and
The length of the current trend
Interpretation
The AD Line is a good indicator of overall market strength; and many feel it is more revealing than popular indices such as BSE Sensex, NSE Nifty, etc. This is because the AD line is usually calculated on all the stocks listed in the markets rather than just 30 or 50 stocks that make up the major indices.
When the AD line is rising, more stocks are advancing than declining and the A/D Line moves up.
When the AD line is falling, more stocks are declining than advancing and the A/D Line moves down.
Those of you who may be interested can view that attached chart of NSE 50 with the AD Line overlaid. You can see that although the NSE 50 continuous to make new highs the AD Line (Red Line) is declining.
With so much talk of this indicator in the media, I though it would be useful to throw some light on this market breath indicator.
The Advancing-Declining Issues is calculated simply by subtracting the number of declining issues from the number of advancing issues.
This difference between the number of advancing and declining issues is the foundation of many market breadth indicators. These indicators include the Advance/Decline Line, Advance/Decline Ratio, Absolute Breadth Index, Breadth Thrust, McClellan Oscillator and Summation Index. Indicators that use advancing and declining issues in their calculations are called market breadth indicators.
The AD Line peaks out well ahead of the more widely followed market indices and averages. It provides such useful information as:
Overall market strength
Rising or falling trends
Whether the trend is intact, and
The length of the current trend
Interpretation
The AD Line is a good indicator of overall market strength; and many feel it is more revealing than popular indices such as BSE Sensex, NSE Nifty, etc. This is because the AD line is usually calculated on all the stocks listed in the markets rather than just 30 or 50 stocks that make up the major indices.
When the AD line is rising, more stocks are advancing than declining and the A/D Line moves up.
When the AD line is falling, more stocks are declining than advancing and the A/D Line moves down.
Those of you who may be interested can view that attached chart of NSE 50 with the AD Line overlaid. You can see that although the NSE 50 continuous to make new highs the AD Line (Red Line) is declining.
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