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V.12:5 (211-214): Breadth Stix And Other Tricks By Tushar S. Chande, Ph.D.
V.12:5 (211-214): Breadth Stix And Other Tricks By Tushar S. Chande, Ph.D.
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Breadth Stix And Other Tricks By Tushar S. Chande, Ph.D.
Interested in advance-decline indicators? Well, you're in luck. Here, Chande reviews popular versions of these indicators and explains that since they are all derived from the same raw data, they have certain similarities. Chande explains how to derive a stochastic oscillator from market breadth data for market timing.
The daily number of advancing issues (ADI) and the daily number of declining issues (DCI) are two items of data unique to the stock market. Technical analysts have developed a variety of ways to analyze this data. Strong similarities exist between these approaches, not surprising, considering they use the same raw data. But none is completely like another, and so you can use the indicator that best suits your trading style.
VARIETY'S THE SPICE
The ADI and DCI data can be analyzed in a number of ways, a few of which are summarized in Figure 1. You could find other combinations as well. The simplest approaches, of course, would be to look at the ADI and DCI by themselves, or use the difference of two moving averages of the ADI or DCI to form an oscillator or take the daily difference between ADI and DCI. Let us call this the daily difference of issues (DDI = ADI - DCI). You can now take the difference in the moving averages of the DDI to give yet another net difference oscillator.
You can also define ratios using ADI and DCI, using any of the following ratios. These indicators can be used to identify two sets of conditions overbought/oversold situations, and the trend of the broad market.
Interested in advance-decline indicators? Well, you're in luck. Here, Chande reviews popular versions of these indicators and explains that since they are all derived from the same raw data, they have certain similarities. Chande explains how to derive a stochastic oscillator from market breadth data for market timing.
The daily number of advancing issues (ADI) and the daily number of declining issues (DCI) are two items of data unique to the stock market. Technical analysts have developed a variety of ways to analyze this data. Strong similarities exist between these approaches, not surprising, considering they use the same raw data. But none is completely like another, and so you can use the indicator that best suits your trading style.
VARIETY'S THE SPICE
The ADI and DCI data can be analyzed in a number of ways, a few of which are summarized in Figure 1. You could find other combinations as well. The simplest approaches, of course, would be to look at the ADI and DCI by themselves, or use the difference of two moving averages of the ADI or DCI to form an oscillator or take the daily difference between ADI and DCI. Let us call this the daily difference of issues (DDI = ADI - DCI). You can now take the difference in the moving averages of the DDI to give yet another net difference oscillator.
You can also define ratios using ADI and DCI, using any of the following ratios. These indicators can be used to identify two sets of conditions overbought/oversold situations, and the trend of the broad market.
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