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market_indicators:ad_line [2019/06/24 19:38] 127.0.0.1 external edit |
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| ====== Advance-Decline Line ====== | ====== Advance-Decline Line ====== | ||
| - | ===== Introduction ===== | + | ===== What Is the Advance-Decline Line? ===== |
| The Advance-Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances, rising when it is positive and falling when it is negative. Chartists can use Net Advances to plot the AD Line for the index and compare it to the performance of the actual index. The AD Line should confirm an advance or a decline with similar movements. Bullish or [[:glossary_b#bearish_divergence|bearish divergences]] in the AD Line signal a change in participation that could foreshadow a reversal. | The Advance-Decline Line (AD Line) is a breadth indicator based on Net Advances, which is the number of advancing stocks less the number of declining stocks. Net Advances is positive when advances exceed declines and negative when declines exceed advances. The AD Line is a cumulative measure of Net Advances, rising when it is positive and falling when it is negative. Chartists can use Net Advances to plot the AD Line for the index and compare it to the performance of the actual index. The AD Line should confirm an advance or a decline with similar movements. Bullish or [[:glossary_b#bearish_divergence|bearish divergences]] in the AD Line signal a change in participation that could foreshadow a reversal. | ||
| - | ===== Calculation ===== | + | ===== Calculating the Advance-Decline Line ===== |
| <code> | <code> | ||
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| {{:market_indicators:ad_line:adl-01-nyexamp.png|Breadth AD Line - Chart 1}} | {{:market_indicators:ad_line:adl-01-nyexamp.png|Breadth AD Line - Chart 1}} | ||
| - | ===== Interpretation ===== | + | ===== What Does the Advance-Decline Line Indicate? ===== |
| The AD Line measures the degree of participation in an advance or a decline. An AD Line that rises and records new highs along with the underlying index shows strong participation that is bullish. An AD Line that fails to keep pace with the underlying index and confirm new highs shows narrowing participation. Market strength is undermined when fewer stocks participate in an advance. Narrowing participation is often identified with a bearish divergence between the AD Line and the underlying index. | The AD Line measures the degree of participation in an advance or a decline. An AD Line that rises and records new highs along with the underlying index shows strong participation that is bullish. An AD Line that fails to keep pace with the underlying index and confirm new highs shows narrowing participation. Market strength is undermined when fewer stocks participate in an advance. Narrowing participation is often identified with a bearish divergence between the AD Line and the underlying index. | ||
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| Second, the advance-decline statistics favor small-cap and mid-cap stocks over large-cap stocks. Thousands of stocks trade on the Nasdaq and NYSE every day and the vast majority of these stocks are small- and mid-cap. Relatively few are large-caps. Regardless of market cap or volume, an advance counts as +1 and a decline counts as -1. This means that an advance in ExxonMobil, with a [[:glossary_m#market_capitalization|market capitalization]] in excess of $200 billion and average daily volume in excess of 20 million shares, counts the same as an advance in Teco Energy, which has a market capitalization less than $5 billion and average daily volume around 2 million shares. The AD Line is the great equalizer. | Second, the advance-decline statistics favor small-cap and mid-cap stocks over large-cap stocks. Thousands of stocks trade on the Nasdaq and NYSE every day and the vast majority of these stocks are small- and mid-cap. Relatively few are large-caps. Regardless of market cap or volume, an advance counts as +1 and a decline counts as -1. This means that an advance in ExxonMobil, with a [[:glossary_m#market_capitalization|market capitalization]] in excess of $200 billion and average daily volume in excess of 20 million shares, counts the same as an advance in Teco Energy, which has a market capitalization less than $5 billion and average daily volume around 2 million shares. The AD Line is the great equalizer. | ||
| - | ===== Conclusion ===== | + | ===== The Bottom Line ===== |
| The AD Line is a breadth indicator that reflects participation. A broad-based advance shows underlying strength that lifts most boats. This is bullish. A narrow advance shows a relatively mixed market that is selective. Narrowness participation in an advance (or decline) sets up the divergence signals. An advance with narrow participation is unlikely to keep up with the underlying index and a bearish divergence will form. Similarly, a decline with few stocks participating is unlikely to keep up with the index and a bullish divergence will form. These divergences can help chartists identify potential reversals in the underlying index. | The AD Line is a breadth indicator that reflects participation. A broad-based advance shows underlying strength that lifts most boats. This is bullish. A narrow advance shows a relatively mixed market that is selective. Narrowness participation in an advance (or decline) sets up the divergence signals. An advance with narrow participation is unlikely to keep up with the underlying index and a bearish divergence will form. Similarly, a decline with few stocks participating is unlikely to keep up with the index and a bullish divergence will form. These divergences can help chartists identify potential reversals in the underlying index. | ||
| - | ===== SharpCharts ===== | + | ===== Applying the Advance-Decline Line in SharpCharts ===== |
| The AD Line can be created on SharpCharts for the Amex, Vancouver, Nasdaq, NYSE or Toronto stock exchanges. Check our [[:index_symbols|Index and Market Indicator Catalog]] for available symbols. First, enter the symbol for Net Advances of the desired index. Second, change the chart "type" to "cumulative." Click "update" to create the AD Line. | The AD Line can be created on SharpCharts for the Amex, Vancouver, Nasdaq, NYSE or Toronto stock exchanges. Check our [[:index_symbols|Index and Market Indicator Catalog]] for available symbols. First, enter the symbol for Net Advances of the desired index. Second, change the chart "type" to "cumulative." Click "update" to create the AD Line. | ||
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| ===== Symbol List ===== | ===== Symbol List ===== | ||
| - | StockCharts.com users can access up-to-date lists of symbols for our [[https://stockcharts.com/search/?q=%22Advance-Decline%20Issues%20Indicators%22§ion=symbols|Advance-Decline Issues Indicators]] and [[https://stockcharts.com/search/?q=%22Advance-Decline%20Issues%20Percent%22§ion=symbols|Advance-Decline Percent Indicators]]. Both indicators can be used to create AD Lines. From these lists, click the "Mentions" icon to the right of a specific symbol for more details about the symbol, as well as recent mentions in Public ChartLists, blog articles, and more. | + | StockCharts.com users can access up-to-date lists of symbols for our [[https://stockcharts.com/search/?blogAuthor=&q=Advance-Decline%20Issues§ion=symbols|Advance-Decline Issues Indicators]] and [[https://stockcharts.com/search/?blogAuthor=&q=Advance-Decline%20percent§ion=symbols|Advance-Decline Percent Indicators]]. Both indicators can be used to create AD Lines. From these lists, click the "Mentions" icon to the right of a specific symbol for more details about the symbol, and recent mentions in Public ChartLists, blog articles, and more. |