The face-down line is a technical indicator of the stock market used by investors to measure the number of individual shares participating in a market increase or decline. Because price changes from large stocks can have a disproportionate effect on stock market weighted stock indexes such as S & P 500, NYSE Composite Index, and the NASDAQ Composite index, can be useful for knowing how broadly this movement extends to a larger universe of smaller stocks. Since the market index represents a group of stocks, they do not present the overall picture of trading day and market performance during today. Although the market index provides an overview of what has happened during the trading day, the advance/downturn provides an overview of the individual's performance of a particular stock.
The downward trend line is a plot of the cumulative sum of daily differences between the number of advanced issues and the number of problems that decline in a particular stock market index. Thus it moves up when indexes are more advanced than issues that decline, and move down when there is more decline than advancing the problem. The formula for ADL is:
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Rumus Garis Muka/Penurunan dapat diterapkan pada volume stok yang memajukan dan menurun.
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ADL is one of the oldest indicators based on Data-Decline and it's the most popular of all internal indicators.
Video Advance-decline line
Divergence
"Divergence" is when the stock market index moves in one direction while the ADL on the index moves in the opposite direction. If the index moves up while the ADL falls, the index may mislead the true direction of the overall market, as it did towards the end of the Dot-com US bubble in 1999-2000, as the index continued to strengthen while the ADL deviated downwards beginning in early 1999. Negative differences was also seen towards the end of the bull market that soared, in 1972 at the height of the Nifty Fifty market, and began in March 2008 before the market collapsed late in 2008.
Maps Advance-decline line
Application face down number
There may be cases where the index reports gains at the end of the trading day. This gain can be attributed to an increase in the number of shares. However, a significant decline by declining stocks can be observed relative to stocks moving forward.
However, this result should be interpreted as a decline in the market, no matter that the index has improved. Therefore, you should base your judgment on market performance on the advance/decrease number, not on the performance of a particular index no matter how broad it is.
There are many cases where major increases in the index are not accompanied by an increase in the amount of down payment. In such a case it is reasonable to conclude that at the end of the trading day the index will decrease.
The converse is also true. For example, if there is a significant movement in advance/decrease numbers, you can expect movement in different indices as well.
In addition, a market that is experiencing a trend towards a decrease or increase is very unlikely to reverse its movement immediately on the next trading day.
Face down rates can also be used in your daily observations of trades to determine if a particular trend is false or spot.
Finally, use face-down figures whenever you need to make an assessment of market performance. These numbers can also give you an understanding of the index movement.
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Example of marketplace chart
- NASDAQ Breadth
- DAX Breadth
- FTSE Breadth
- STI Breadth
src: msgraphics.blob.core.windows.net
References
Source of the article : Wikipedia
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