What is it?
Breadth indicators generally show the amount of participation in the movement of a stock market. It can be used to answer the question ‘how broad is the rally or sell-off?’.
By evaluating how many stocks are increasing or decreasing in price and how many trades investors are placing for these stocks, breadth indicators can be used to show the following:
- overall market sentiment – whether it’s bullish (positive market breadth) or bearish (negative market breadth)
- evaluate the behaviour of a particular industry or sector
- analyse the magnitude of a rally or fall
How is it calculated?
A mathematical formula that uses advancing and declining issues on a given day or as a moving average. Many measurements are used: advances divided by declines, as a percentage, advances minus declines as a net positive or negative number.
Breadth Indicator Examples
There are several different types of breadth indicators such as the follow:
- NYSE advance-decline line
- absolute breadth index
- Arms index
- Force Index
- Chaikin oscillator
- up/down volume ratio
- up/down volume spread
- on-balance volume
- cumulative volume index